Inflation Data and Macro Analysis 🚨

At the end of the article, I also provide you with the overlooked detail about Kevin Warsh during a period when everyone in the market is parroting the same thing 🚨
Tensions in the Strait of Hormuz and the halt of maritime traffic have caused energy costs to skyrocket.
This has become the main driver pushing headline inflation in the US to 4.2%.
​Currently, the biggest pressure on global markets and inflation is definitely this geopolitical crisis.
​The new Fed Chair Kevin Warsh, who took office at the end of May, faces a very tough test right from the start.
Warsh was appointed by Trump and was actually more inclined toward rate cuts and easing the market. He even wanted to use new inflation measurement methods that exclude temporary and geopolitical shocks like fuel prices to cut interest rates.
However, this 4.2% inflation rate and strong employment data have put Warsh in a bit of a tough spot. A rate cut at the June 16-17 Fed meeting would now be completely a big surprise.
In his first meeting, Warsh will probably have to resist Trump's pressure to cut rates and will adopt a cautious hawkish tone.
🟥 Negative Developments:
The fact that the US annual inflation has risen from the previously announced 3.8% to 4.2% indicates that price pressures are intensifying again and that the Fed is moving away from its 2% target.
Disruptions in the Strait of Hormuz due to tensions between Iran and the US continue to create structural inflationary pressure by keeping oil and logistics costs high.
With inflation at 4.2% and employment remaining strong, the likelihood of the Fed cutting rates in June has almost disappeared.
Although the new Chair Kevin Warsh is expected to pursue a more dovish policy under normal circumstances, he may have to adopt a more cautious and hawkish tone toward the market after this inflation data.
🟩 Positive Developments:
The fact that the data exactly matched the market expectation of 4.2% prevented at least an immediate shock and panic sell-off.
Since institutional investors and algorithms had anticipated this rate and positioned accordingly, a destructive crash did not occur in the markets at the announcement.
Excluding volatile items like energy and food, core inflation staying at 2.9% indicates that the headline increase is more due to geopolitical factors rather than a permanent economic deterioration.
The Fed's desire to keep the economy buoyant and possible diplomatic moves to resolve geopolitical crises prevent the market from falling into complete pessimism.
🚨 Now, I want to share with you a very important detail that everyone is overlooking here:
Contrary to the general market sentiment, Kevin Warsh advocates for the underlying price trend, excluding temporary geopolitical noise, rather than panicking over the headline 4.2% rate.
According to this logic pointed out by Warsh, the trimmed mean inflation, which excludes outliers and shocks, was 2.35% last month and has remained almost flat at 2.40% this month. This suggests that Warsh sees the current high inflation as temporary and that when things calm down, there will be room for rate cuts.
Kevin Warsh explicitly stated in his official Senate confirmation hearing:
​"What matters most to me is the underlying inflation rate. Not one-time changes in prices caused by geopolitical shifts or changes in beef prices."
In other words, he fully agrees with the official stance that the war in the Strait of Hormuz or supply shocks do not reflect a permanent trend, but are temporary noise.
Since Warsh took office, there has been no sharp U-turn or contradictory statement that would completely dismiss this macro approach and philosophy, or that would directly contradict his previous statements.