Warsh’s Rate Decision Amid Supply-Driven Inflation

The Federal Open Market Committee meets July 28-29, 2026, to decide on the federal funds rate. Chair Kevin Warsh, who took over in May, has pledged “no tolerance” for elevated inflation but has not signaled his vote. Market pricing on the CME FedWatch tool shows a 38 % chance of a hike and a 62 % chance of holding rates steady.

Kevin Warsh's second Fed meeting: Hold steady or hike? Strategists split

Warsh inherited inflation that has stayed above the Fed’s 2 % target for more than five years. Core inflation has lingered near 3 % since 2023, while headline CPI fell to 3.5 % in June after a temporary dip in gasoline prices. The renewed war with Iran in mid-2026 has pushed oil and gas prices higher, reviving supply-side pressures. AI-driven demand for components and recent tariffs also add upward pressure.

New York Post

• Overall inflation ? 3.5 %; core ? 3 %.

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• Moody’s Analytics attributes 0.66 pp of year-end inflation to the Iran war, 0.17 pp to tariffs, and ~0.25 pp to AI-related demand.

CNN

• Brent crude traded around $90 per barrel after briefly topping $100.

Kevin Warsh's second Fed meeting: Hold steady or hike? Strategists split

• The 10-year Treasury yield briefly rose above 4.7 %, its highest in roughly 18 months.

Associated Press

• CME FedWatch: 38 % probability of a rate increase at the July meeting.

Kevin Warsh's second Fed meeting: Hold steady or hike? Strategists split

Warsh rejected forward guidance, saying the Fed will not pre-commit to a specific policy path.

CNBC

Former Fed Chair Janet Yellen, speaking at a Brookings event, warned that “monetary policy cannot tame supply-driven inflation without exacting unacceptable unemployment costs.”

CNN

Fed Governor Christopher Waller said “sternly staring at inflation until it melts before our withering gaze is not an option,” indicating openness to hikes if core inflation climbs.

Associated Press

James Bullard, former president of the St. Louis Fed, said Warsh’s tough rhetoric has raised market expectations for action, but investors will soon demand tangible results.

Associated PressCNBCNew York Times

Stephen Douglass, chief economist at NISA Investment Advisors, predicts the Fed will not raise rates this year, citing the limited impact of rate moves on current supply-driven price pressures.

Associated Press

CNN quotes economists saying inflation expectations are not near a “danger zone,” while The Fool warns of a potential wage-price spiral as the public begins to expect higher inflation. The sources do not provide a consensus on whether expectations have already shifted, leaving uncertainty about the magnitude of the risk.

CNN

• “Monetary policy 101 says when there is a supply shock, don’t respond. Follow the script. It’s worked pretty well,” — Mark Zandi, Moody’s Analytics

CNN

• “Monetary policy cannot tame supply-driven inflation without exacting unacceptable unemployment costs,” — Janet Yellen, former Fed chair

CNN

• “Sternly staring at inflation until it melts before our withering gaze is not an option,” — Christopher Waller

Associated Press

These statements capture the range of expert views on the appropriateness of rate hikes, the nature of the current inflation, and the challenges the Fed faces in a supply-shock-dominated environment.

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