On Tuesday, July 14th, the U.S. Consumer Price Index (CPI) fell 0.4% month-over-month in June, and the year-over-year increase dropped from 4.2% to 3.5%; the core index remained flat month-over-month and fell to 2.6% year-over-year. Following the data release, the yield on the 2-year U.S. Treasury note fell to approximately 4.18%, and the 10-year yield fell to approximately 4.56%. The dollar index declined to approximately 100.70, and the Nasdaq Composite Index opened up approximately 0.55%, but Brent crude oil prices again approached $87 per barrel. The market is not simply facing weakening inflation, but rather a simultaneous occurrence of soft data, hawkish policy language, and a rebound in energy prices. In his first semi-annual congressional hearing, Warsh clearly stated that the Federal Reserve has "zero tolerance" for persistently high inflation. The quality of the inflation improvement in June was higher than the surface figures suggest. Energy prices fell 5.7% month-over-month, and gasoline prices fell 9.7%, which were the main reasons for the overall index decline; more importantly, the core index was 0% month-over-month, and housing costs rose only 0.1%, the smallest monthly increase since January 2021. This indicates that price pressures are no longer solely driven by energy, with services and housing also experiencing marginal cooling. However, Warsh emphasized that "long-term underlying inflation is primarily determined by monetary policy" and reiterated that the target range for the federal funds rate remains at 3.50% to 3.75%. This statement cuts off the market's direct extrapolation of easing from weak inflation; the policy response function still revolves around the persistence of inflation, the stability of expectations, and the secondary transmission of supply shocks. June data recorded the previous decline in energy prices, while July pricing is reflecting new supply risks. Brent crude rose to around $86 per barrel, and U.S. crude regained its position above $80 per barrel, meaning that the energy component may rebound significantly this month. If oil prices remain high, the impact will first enter gasoline, transportation, and aviation, and then spread through logistics, chemicals, and food costs. Therefore, the slowdown in core inflation in June reduced the necessity for immediate tightening, but did not eliminate the risk of reflation in the third quarter. The interest rate market has quickly lowered the probability of a Fed rate hike in July to around 15.5%, down from around 42% the previous day. The 2-year Treasury yield fell more than the 10-year yield, reflecting a cooling of front-end policy expectations, but the long end remains constrained by energy uncertainty, term premiums, and supply pressures. This steepening of the bull market is not a signal of comprehensive easing, but rather the market rewriting "immediate rate hike" as "continue to observe, but reserve the option of action within the year." Warsh stated that corporate investment is the most prominent economic feature at present. As of the first quarter, equipment investment increased by about 8% year-on-year in the fourth quarter, and high-tech spending approached 25%. Its short-term impact is biased towards the demand side: data center construction requires electricity, equipment, chips, land, and specialized labor, which may push up capital goods prices and some wages; the medium-term impact depends on whether productivity can spread to more industries, thereby reducing unit labor costs. This is also the identification dilemma faced by the Federal Reserve. If all investment enthusiasm is regarded as inflation, it may suppress the formation of supply capacity; if potential productivity gains are factored into policy in advance, it may underestimate the overheated demand during the construction cycle. US non-farm payrolls increased by only 57,000 in June, the unemployment rate was 4.2%, and the labor force participation rate fell to 61.5%, indicating that the total employment is stable but the momentum is not strong. Policy space exists, but it is insufficient to support a radical shift. Among Warsh's five working groups, the balance sheet and the adequate reserve system are the most worthy of traders' continued attention. It determines reserve requirements, overnight interest rate fluctuations, short-term liquidity premiums, and the endpoint of balance sheet reduction. Even if the policy rate remains unchanged, a change in the operating framework can repric the banking system's preference for reserves, money market spreads, and the term structure of government bonds. Therefore, the core of this hearing is not how much will be adjusted at the next meeting, but rather Warsh's attempt to rewrite the decision-making framework: reducing reliance on single models and forward guidance while increasing the weight of real-time data, productivity assessments, and balance sheet mechanisms. The source of market volatility will expand from "interest rate path deviation" to "institutional parameter uncertainty," risks that typically persist longer and are more difficult to price out with a single data release.