Key facts
- Federal Reserve Chair Kevin Warsh will testify before Congress on July 14.
- The testimony precedes the July 28-29 FOMC meeting.
- Markets are anticipating potential interest rate hikes due to inflation concerns.
- May's PCE inflation is expected to rise 0.5% month-over-month and 4.1% year-over-year.
- Market pricing indicates a significant chance of rate hikes in September and later.
Federal Reserve Chair Kevin Warsh is scheduled to deliver his first monetary policy presentation to Congress on July 14, a significant event preceding the Federal Open Market Committee's (FOMC) July 28-29 meeting. This appearance comes as investors are increasingly pricing in the possibility of interest rate hikes, driven by persistent inflation data and a robust labor market. Economists anticipate that May's headline Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, will show a 0.5% increase from April, bringing the year-over-year figure to 4.1%. This follows a 0.4% rise in April. Bank of America has revised its forecast to include 25 basis point rate hikes in September, October, and December of 2026, a shift from its previous expectation of no policy changes for the year. Market sentiment, as reflected in prediction markets and tools like CME FedWatch, indicates a growing probability of rate increases in the coming months, with current odds suggesting a 25% chance for a July hike and over 51% for a September hike. Warsh's testimony is expected to provide insights into the Fed's strategy regarding inflation risks and future interest rate policy.