Voters have openly criticized all inflation indicators, and Haskett said there is no reason to raise interest rates.

Author: Wu Yu, Jinshi Data

On Wednesday, at a Senate Finance Committee hearing, Federal Reserve Chair Kevin Warsh said that recent inflation data does not perfectly reflect underlying inflation conditions, and he was blunt that he is not satisfied with any inflation indicator. In his view, any central bank would be happy when the data moves in the right direction, but a one-off price change does not necessarily turn into inflation (a trend).

Warsh said: “The labor market looks quite good, but the inflation situation is not so optimistic. I’m not satisfied with any inflation indicator. We will review our tools, including the balance sheet and interest rates, to see whether adjustments are needed to address inflation.”

Spot gold fell by more than $20 on the news in the short term, breaking below the $4,040 level. Spot silver’s intraday decline widened to 2%. Warsh’s hardline stance on inflation raised expectations for interest rates, dealing a significant blow to non-yielding precious metals.

Around the impact of AI, Warsh discussed at the hearing that, in the short term, he believes AI investment is beneficial for jobs because the United States is building infrastructure. He also pointed out that AI will bring disruptive changes, and he is seeking permission to use a range of new AI models. Based on what is currently observed, AI’s impact on the demand side is showing up faster than on the supply side.

Warsh also said that over the next 12 months, AI will push up the observable price levels. As for whether AI will lead to inflation, he believes it depends on the Federal Reserve.

When talking about price issues, he said directly: “The price surge triggered by AI is real, and I don’t want to downplay it.”

On the jobs impact, Warsh, on one hand, said he believes AI will be a job creator in the long run and may bring disruptive effects. On the other hand, he also said that in the short term, there is no guarantee that AI will not cause employment shocks, and he cannot fully reassure the public on employment issues.

Earlier the same day, National Economic Council Director Kevin Hassett appeared on CNBC’s “Squawk Box.” Citing the latest U.S. CPI data, he said that there is no reasonable basis for any rate hikes, and called this inflation data “outstanding.”

Hassett said plainly: “At this stage, there is absolutely no reason to raise rates.”

He also judged that if economic data continues to maintain the current cooling trend, the Fed’s policy direction will shift toward rate cuts. Hassett added that the White House expects Warsh, who will take office at the end of May and was nominated by Trump, to lead the Federal Open Market Committee (FOMC) to make “the right decision.”

This push for rate cuts is consistent with Trump’s long-standing demands. Trump has previously urged the Fed multiple times to cut interest rates as soon as possible to boost the economy and reduce financing costs across society.

Hassett’s remarks came just one day after the U.S. Bureau of Labor Statistics released the June CPI. As a key gauge of changes in U.S. goods and services prices, the data was clearly below market expectations.

The U.S. Bureau of Labor Statistics data showed that June seasonally adjusted CPI fell 0.4% month over month, and the year-over-year inflation rate eased to 3.5%. It was not only significantly better than the prior consensus forecast by economists at The Wall Street Journal, but also marked the largest single-month month-over-month decline in more than six years.

In the interview, Hassett commented: “This is one of the best inflation reports I’ve seen during my career.”

On attribution, Hassett credited the easing of inflation to the Trump administration’s policy actions, while also emphasizing that the downward move in prices is not only due to a phase of easing in the Iran-U.S. war that has driven oil prices lower.

He relayed his team’s data breakdown, saying that after Trump prioritized public safety governance in major cities, vehicle theft cases declined and auto insurance premiums fell noticeably—this is also an important factor in bringing down overall prices.

However, Warsh did not ease his stance against inflation despite the inflation data coming in clearly better than expected. On Tuesday, when he attended a House Financial Services Committee hearing, he had already said clearly: “Some market participants see this morning’s data and claim the job is done and that everything is going well, but I do not agree with that assessment.”