Warsh's Hawkish Credentials on the Line in Upcoming Inflation Data

Fed chief Kevin Warsh's hawkish credentials are being tested ahead of this week's inflation data. As the head of the US Federal Reserve, Warsh has emphasized keeping inflation down over maximizing employment. However, despite elevated inflation at 3.5% in June, above the Fed's 2% target, he has presided over two meetings with no rate hikes.

The Fed's policy-setting committee voted last month to hold rates steady, but three members dissented, calling for a quarter-point increase. The prevailing narrative is that inflation remains high but is not far from the Fed's goal, according to Bob Edwards, chief investment officer at Edwards Asset Management.

A benign consumer price index (CPI) report would give the market permission to run faster, while a rate hike in September could draw the ire of US President Donald Trump. Warsh seems to be playing for more time to see if tariffs and/or oil prices are causing a more profound upswell in inflation.