The landscape of US monetary policy is undergoing a rare shift, with newly appointed Federal Reserve Chairman Kevin Warsh about to hold his first interest rate decision meeting since taking office, and the policy operating environment has changed dramatically compared to his predecessor.

Against the backdrop of a sharp rise in the latest inflation data, the Trump administration has changed its previous approach of strongly intervening in the Federal Reserve's policies, choosing instead to give the new Fed chairman ample autonomy. This has created a favorable political environment for the Fed to postpone interest rate cuts or even maintain a tight monetary policy, and the Fed's subsequent interest rate path has also ushered in new uncertainties.

Inflation data has risen sharply, and market interest rate expectations have become more conservative.

The U.S. Bureau of Labor Statistics released the latest inflation data, showing that the U.S. Consumer Price Index (CPI) rose 4.2% year-on-year in May, a three-year high, highlighting renewed upward pressure on inflation.

Faced with better-than-expected inflation data, US President Trump softened his stance in the Oval Office, breaking with the previous practice of pressuring the Federal Reserve to cut interest rates and creating a more relaxed political environment for Kevin Warsh to maintain interest rate stability. Trump stated, "I approve of the current inflation data, and inflation will fall rapidly after the regional conflicts end."



The situation in Iran has disrupted shipping through the Strait of Hormuz since March, leading to a continuous rise in global energy prices and directly pushing up overall inflation in the United States. Several Federal Reserve officials have signaled a hawkish stance, with Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack both stating that it is not appropriate to cut interest rates at this stage, and even not ruling out the possibility of a rate hike later this year.

The market generally expects the Federal Reserve to continue its policy since December of last year, keeping short-term interest rates unchanged in the range of 3.5% to 3.75%.

The Federal Reserve adopts a flexible approach to policy adjustments and rationally differentiates between different types of inflation.

Despite overall inflation data rising, excluding the more volatile food and energy categories, the year-on-year increase in core inflation in the United States was only 2.9%, indicating a relatively mild upward trend in inflation.

Warsh's policy approach has undergone a significant shift compared to previous years. In 2025, he repeatedly argued that the development of the artificial intelligence industry provided ample conditions for the Federal Reserve to cut interest rates. However, at his inauguration hearing in April of this year, he changed his stance, admitting that inflation risk remains a core issue of concern for the market, and that the interest rate cut plan would be difficult to implement before inflationary pressures are fully alleviated.

Warsh stated that monetary policy formulation will not be confined to short-term, one-off price fluctuations. Energy price increases triggered by geopolitical conflicts are short-term supply shocks, not intrinsic, sustained inflation. The Federal Reserve will adhere to its analytical logic of "seeing through short-term fluctuations," focusing on tracking long-term potential inflation trends and will not blindly adjust monetary policy based on isolated data anomalies. This approach aligns closely with Trump's views, further solidifying the Fed's policy direction of maintaining stable interest rates.

A dramatic shift in governing attitude has led to vastly different fates for the former and new Federal Reserve chairmen.

Trump's contrasting attitudes toward the new and former Federal Reserve chairs present a stark contrast. Previously, Trump had frequently criticized former Fed Chair Jerome Powell, repeatedly accusing him of being too conservative in his pace of interest rate cuts, publicly attacking his governing decisions, and even resorting to various means to attempt to interfere with Fed policy, raising questions about the Fed's independence.

Trump showed considerable tolerance and support for Kevin Warsh. At his inauguration on May 22, Trump stated, "I expect Kevin to perform his duties completely independently, formulate monetary policy autonomously, and do an excellent job." In subsequent interviews, he reiterated that he would not exert excessive influence over the Federal Reserve's interest rate decisions.

Smooth communication between government and business has ushered in a policy honeymoon period for the new chairman.

Since taking office, Warsh has maintained regular communication with the US government. During the nomination review stage, he conducted working exchanges with US Treasury Secretary Scott Bessent. After taking office, he continued the tradition of regular meetings between the Federal Reserve Chairman and the Treasury Secretary, ensuring smooth and efficient policy communication channels.

A stable political environment and independent decision-making space have allowed Warsh to enjoy a valuable policy honeymoon period. The Federal Reserve has officially announced that Kevin Warsh will hold his first press conference since taking office on June 17th (local time), where he will detail his future monetary policy strategy, becoming a key focus for global financial markets.

Overall , the Federal Reserve is currently balancing inflation resilience with the current economic situation, coupled with a loose political environment. The window for short-term interest rate cuts is basically closed, and maintaining stable interest rates will become the core theme. Subsequent policy adjustments will depend entirely on the trend of economic data.