Fed Chair Warsh: Inflation Cools to 3.5%, but Work Not Done

By Rachel Barber, Medora Lee, Daniel de Visé, and Betty Lin-Fisher, USA TODAY Published: July 14, 2026 at 4:01 AM PDT | 21 min read

July 14 offered a trove of information for those watching the U.S. economy, from the Labor Department's Consumer Price Index (CPI) report on June inflation to Federal Reserve Chair Kevin Warsh's testimony before Congress.

After three months of acceleration driven by oil market disruptions tied to the Iran war, the U.S. annual inflation rate fell to 3.5% in June, down from 4.2% in May. This means prices continued to rise, but at a slower pace than the previous month. Contributing to the deceleration was the short-lived ceasefire between the two nations, which drove U.S. gas prices lower in June.

Renewed U.S.-Iran hostilities in July have already started driving oil prices back up and shifted economists' outlooks. However, the CPI report provides a look back at where prices stood last month. With those dynamics in mind, focus is on core inflation, which strips out volatile food and energy costs. Core inflation fell to 2.6% over the year in June, after rising to 2.9% in May.

After the report's release, Warsh appeared before House lawmakers on the Financial Services Committee for a discussion about monetary policy and the future of the U.S. economy. With inflation still above the Fed's 2% target and signs the job market is picking back up despite lower-than-expected hiring in June, forecasters were split ahead of the report on whether Fed policymakers will raise their benchmark interest rate or hold it steady after their next meeting on July 29. After its release, more are confident the Fed will leave it unchanged.

"This is great news for monetary policy and the Federal Reserve, as the core CPI came down considerably on a year-over-year basis. The only caveat for monetary policy is that this is just one month, and we will have to wait to see what happens going forward with the conflict with Iran. The weakness at the core CPI level is an indication that the increase in energy prices is relatively contained and it is not, so far, contaminating other prices in the economy."

>

— Eugenio Aleman, Chief Economist, Raymond James

Gas prices have gone up to $3.57 from the listed $3.47 days prior at the Freedom Fuel gas station in Southampton on July 10, 2026. Gas prices have gone up to $3.57 from the listed $3.47 days prior at the Freedom Fuel gas station in Southampton on July 10, 2026.

More: June jobs report shows hiring below expectations after spring surge

ICYMI: Takeaways from Warsh's House Testimony

02:23 PM ET, July 14, 2026 — Rachel Barber

Warsh spoke to House lawmakers for about three hours in a wide-ranging discussion about monetary policy and the future of the U.S. economy on July 14. In case you missed it, here are five takeaways:

1. AI optimism: Warsh said if AI adoption is like previous technological shocks, the U.S. will be richer and more productive for it. He acknowledged it might be disruptive in the near term but believes it will create "a lot" of jobs. "Who knew that the creation of the internet would create a million and a half Uber and Lyft drivers? I certainly didn't," he said. "So, I want to be very open-minded about the job producing elements of it."

1. Bringing prices down: After a Labor Department report showed inflation slowed in June, Warsh said the Fed's work to deliver price stability is not done. "I'm not going to show up here and say, 'mission accomplished,'" he said. "There's plenty of work to do."

1. There's a task force for that: Throughout the discussion...