On July 25, Federal Reserve Chair Kevin Warsh warned Congress that inflation remains a serious challenge, cementing the Fed's strict stance against prolonged price increases.
That same day, data showed headline inflation slowing to 3.5% year-on-year for June, with a monthly drop of 0.4%, while core CPI held steady.
Markets initially reacted by slashing the odds of a July rate hike from 42% to just 16%, reflecting hopes for a pause in tightening.
But that betting soon shifted, as investors began factoring in the possibility that the Fed might still raise rates in its upcoming meetings.
Warsh’s remarks and the CPI numbers together suggest the Fed isn’t ready to ease off, keeping the door open for future rate moves depending on incoming economic data.
Investors are now watching key indicators like core inflation and employment closely to gauge whether the bank will act.
Future Fed communications and updates to the interest rate outlook will be key in setting market expectations.
