Last Week in Review: Fed’s Warsh Talks Tough; Inflation Remains above Target

Theresa Sheehan

Fed Chair Kevin Warsh delivered his first semiannual monetary policy testimony on Tuesday and Wednesday. His main themes were the FOMC’s renewed commitment to achieving price stability and his reform agenda at the central bank.

Warsh’s appearance distracted somewhat from the two main inflation reports for June of the consumer price index (CPI) on Tuesday and the final demand producer price index (PPI-FD) on Wednesday.

Both the CPI and PPI came in below expectations for the anticipated month-over-month decline that was led by the decline in energy prices. However, even as the year-over-year increase was also less than the median forecasts, the pace of price increases remains well above the Fed’s 2 percent inflation target.

If the drop in June was a welcome first step toward getting past the energy shock that followed the attack on Iran on February 28, renewed hostilities could well erase that in July.

The all-items CPI was up 3.5 percent from June 2025, slipping from up 4.2 percent in May and up 3.8 percent in April. The core CPI was up 2.6 percent year-over-year in June following up 2.9 percent in May and 2.8 percent in April. The CPI for commodities – which includes energy – was up 4.1 percent in June from a year earlier after up 5.5 percent in May and up 4.6 percent in April. The CPI for services was up 3.2 percent in June compared to June 2025 following up 3.5 percent in May and up 3.4 percent in April. There is still plenty of upward pressure on consumer prices from both services and commodities even as it abates.

The PPI for total final demand rose 5.5 percent in June from a year ago after up 6.0 percent in May and up 5.7 percent in April. The PPI excluding food, energy, and trade services – the BLS core measure – was up 5.1 percent in June, the same as in May and higher the 4.4 per cent increase in April. The PPI for final demand goods increased 7.9 percent year-over-year in June from up 9.8 percent in May and 7.5 percent in April. The PPI for final demand services rose 4.6 percent in June after up 4.5 percent in May and up 5.0 percent in April. Producers have yet to see much improvement in the increases imposed by higher materials prices and transportation costs. Producers have a limited ability to absorb these input costs and some or all of the rise will reach consumers and other businesses.

 

About the Author: Theresa Sheehan

Terry has followed the US economic data for over 35 years. First working with economic databases at McGraw/Hill-Data Resources, then as an economic data reporter at Market News International, and later as an analyst at Stone McCarthy Research Associates. She is deeply familiar with the major high-frequency data reports that drive the financial news cycle. She has followed the ins-and-out of the Board of Governors and District Bank Presidents, and developments in monetary policy as conditions have changed since the Volcker years. Terry is a graduate of the University of Maryland University College with bachelor’s degrees in English, Information Management, and Psychology.

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