(Yahoo! Finance) - Incoming Fed Chair Kevin Warsh will have an inflation problem to tackle. It’s getting ugly too.
The latest Consumer Price Index (CPI) report showed that US inflation has been above the Fed’s 2% target for 62 consecutive months now.
“The Fed lost all credibility when it comes to fighting inflation,” Creative Planning chief market strategist Charlie Bilello said on X.
Inflation, at a glance: The April Consumer Price Index report revealed this week that annual inflation has surged to 3.8%, a significant acceleration from the 3.3% recorded in March. It marked the highest level seen since 2023.
The acceleration stems from a volatile energy sector, with gasoline prices jumping 5.4% in a single month — now up a staggering 28.4% year-over-year — due to supply disruptions from the ongoing Iran conflict.
Grocery store "food at home" costs also exerted heavy pressure, rising 0.7% in April, led by a sharp 2.7% spike in beef prices and a 1.8% increase in fruit and vegetable prices.
Additionally, a 0.6% rise in shelter costs and a 2.8% jump in airline fares pushed the core index higher.
How Wall Street is thinking about interest rates: Morgan Stanley’s economists have joined the camp that rate cuts will likely happen in 2027.
“In the baseline, US disinflation resumes in the second half of this year, allowing the Fed to cut rates twice in [the first half of 2027]. Persistent inflation or faster growth and lower unemployment would take away the cuts in 2027,” Morgan Stanley’s economics team said in a new note on Wednesday.
They join Bank of America Global Research and Goldman Sachs on Team 2027 for rate cuts.
BofA Global Research said last week it expects the Fed to remain on hold in terms of interest rates for the rest of this year, with two 25 basis point cuts in July and September 2027.
Goldman Sachs sees cuts in December 2026 and March 2027, compared with its earlier forecast of an initial rate cut in September of this year.
The bottom line: If you are expecting interest rate cuts out of the block from Warsh (we see you, President Trump) think again. It’s looking like a 2027 event, provided the US conflict with Iran is done, and fuel prices begin to settle down.
By Brian Sozzi - Executive Editor
May 13, 2026
