Federal Reserve Chairman Kevin Warsh pledged Tuesday to restore price stability and make the inflation surge of the past five years "a thing of the past," as a cooler-than-expected U.S. inflation report offered relief to households even while renewed tensions with Iran threatened to push energy costs higher again.
Appearing before the House Financial Services Committee, Warsh identified inflation control as the Federal Reserve's central policy challenge. His testimony came as consumer prices rose 3.5%, below analysts' expectations for a 3.8% increase, according to CNBC.
The Fed's "number one objective is to get monetary policy right, or as near to it as we possibly can," Warsh told lawmakers.
"And if we get policy right, and we will, the inflation surge of the last five years will be a thing of the past," he added.
Warsh's language marked an emphatic commitment to containing price pressures that have reshaped household budgets and business costs. He described inflation as an "undue burden on American households and businesses" and said Federal Open Market Committee members "have no tolerance for persistently elevated inflation. And we share a resolute commitment to restoring price stability."
The latest consumer-price data gave the Fed evidence that inflation pressures had weakened more sharply than economists anticipated in June. CNBC reported that prices registered their biggest decline in more than six years as lower energy costs pulled the headline index down.
On a seasonally adjusted basis, the consumer price index fell 0.4% for the month. Analysts had expected a 0.2% decline, meaning the drop was twice as large as forecast.
Underlying inflation also came in below expectations. Core prices, which exclude more volatile components including energy, were flat during the month and the annual core inflation rate stood at 2.6%. Economists had projected a 0.2% monthly increase and a 2.9% rate.
The figures offer Warsh and other Fed officials a more favourable inflation backdrop, but the source of much of the improvement also creates a vulnerability. Energy prices helped drive the decline in the CPI and have since begun climbing as tensions between the U.S. and Iran intensify around the Strait of Hormuz.
President Donald Trump has said Washington will seek revenue for protecting commercial vessels passing through the waterway while also imposing a blockade on Iranian ports. The renewed confrontation raises the risk that oil and transportation costs could reverse some of the energy-driven improvement reflected in June's inflation report.
Speaking on Fox News' "Fox and Friends," Trump accused Tehran of abandoning an agreement to halt hostilities.
"We had a deal. it was a done deal. and then they broke it. they always break it," Trump said.
The president also said the U.S. would "keep the strait" and "probably run it," outlining a larger American role in securing one of the world's most strategically important shipping routes.
"We will become the guardian of the strait, and we should be reimbursed for that," Trump said, adding that the U.S. "we can't be expected to do that for nothing like we have for many years."
