US President Donald Trump arrives with incoming Federal Reserve Chairman Kevin Warsh for Warsh’s swearing-in ceremony at the White House in Washington, DC, US, on May 22, 2026.
Jonathan Ernst | reuters
A strange incident may happen in the coming days. Federal Reserve Chairman Kevin Wersh could do exactly what his predecessor Jerome Powell did about interest rates — only to get a completely different response from President Donald Trump.
Trump’s unexpected comments on Wednesday on the latest inflation data could give Warsh some wiggle room on interest rates.
“I like inflation,” he said in the Oval Office, hours after the Bureau of Labor Statistics revealed annual inflation rose to 4.2%. If the President is not worried about the highest inflation in three years, that could relieve Warsh’s hopes of reducing interest rates soon.
The president railed against Powell for years and tried to undermine him over what Trump saw as his stubborn refusal to cut interest rates faster and more than the Fed wanted. But now that Warsh has been confirmed as chairman, and faces his first rate-setting Fed meeting next week, Trump has begun to send signals that he won’t mind if Warsh doesn’t cut rates immediately.
Market prospects favor the Fed keeping its short-term interest rates steady at 3.5%-3.75%, as it has since December. The Iran war has sent energy prices soaring since March, as tankers are largely unable to transit the Strait of Hormuz chokepoint between the oil-rich Persian Gulf and the wider world. This includes several Fed officials, including Dallas Fed President Laurie Logan and Cleveland Fed President beth hammackRecently saying they will not cut rates now, and actually think a hike could happen this year.
Inflation rose 4.2% in May from a year earlier, according to consumer-price index data released on Wednesday. That’s a sharp increase, but Fed officials parse the data in ways that make that impact appear more muted. So-called core CPI inflation, which excludes energy and food, was up only 2.9%.
Warsh spent much of 2025 arguing that advances in artificial intelligence were a good reason for the Fed to cut interest rates. But he said at his confirmation hearing in April that “this risk of inflation is still something that is being talked about at kitchen tables and boardrooms.” Unless this subsides, rates are unlikely to be cut.
While one might normally expect the Fed to raise interest rates when inflation rises, Warsh said events like the Iran war are different. “What I’m most interested in is what is the underlying inflation rate, not what is the one-time change in prices due to changes in geopolitics or changes in beef, but what is the underlying generalized change in prices across the economy?” Warsh said at the hearing.
In Fed-speak, this is known as “looking through” the supply shock – letting a one-time problem like the Iran energy shock work its way through the system, even if that one-time problem is lasting longer than originally promised.
Trump signed off on that scene on Wednesday, too. The latest inflation figures are “very good,” Trump said in response to a reporter’s question.
Trump said of inflation, “When the war is over, it’s coming down. It’s going to come down like a rock.”
Comments made by Trump on more than one occasion suggest he is willing to let Warren take unfettered action on interest rates, despite the president’s long-running campaign to cut Powell.
Trump wants higher interest rates, he said in a nbc news interview Aired on Sundays. But he also wants Warsh to “do what he wants, and I don’t want any major influence on him.”
Trump made similar comments at Warsh’s White House swearing-in ceremony on May 22. Trump then said, “I want Kevin to be completely free.” “Just do your job and do a great job.”
These comments are a sharp U-turn from what Trump said about Powell — and more importantly, from what he did to try to replace Powell. Trump said he wants interest rates to drop below 1% and Powell is not compromising out of spite. “I think he hates me,” Trump said of Powell last year and called the Fed chairman an “idiot.”
Powell later said it didn’t matter to him what Trump said. But the President did not stop from name-calling. He attempted to fire Fed Governor Lisa Cook on charges that she committed mortgage fraud. (She fought the battle in court, and the Supreme Court is expected to rule on that case soon.)
Trump also said that the cost overruns in the Fed’s office renovation involved “criminality.” Jeanine Pirro, the U.S. Attorney for the District of Columbia, launched a criminal investigation into the spending and Powell’s testimony in Congress about it. A judge blocked his subpoena in the case and is expected to rule soon on Pirro’s subsequent request that the entire case be dismissed.
Those efforts to influence Powell could result in Trump leaving himself with fewer means to take advantage of Warsh, should he do so. But Warsh entered office openly saying he was willing to listen to the president on rates, although the decision would be up to the Fed.
The White House did not respond to an email Wednesday asking whether Trump and Wersh had talked about inflation. But Warsh is in touch with the administration. He and Treasury Secretary Scott Besant spoke during the confirmation process, and after Wersh’s vote, the two spoke started quickly With a tradition of regular meetings between the Fed Chairman and the Treasury Secretary.
All this is a kind of political honeymoon for the new Fed chairman. How exactly he plans to use it will begin to become clear next week. The Fed said Wednesday that the Chairman will hold his first press conference on June 17 as scheduled.
