Trump loves inflation. Why that should be music to Kevin Warsh’s ears: Analysis

A strange development may occur in the coming days. Federal Reserve Chairman Kevin Warsh may do the same thing his predecessor Jerome Powell did on interest rates; but it could get a completely different response from President Donald Trump.

Trump’s unexpected comments on the latest inflation number on Wednesday could give Warsh some leeway on interest rates.

“I love inflation,” he said in the Oval Office, just hours after the Bureau of Labor Statistics announced that annual inflation had risen by 4.2%. If the president doesn’t deal with inflation, which is the highest in three years, that could provide Warsh with an opportunity to postpone expectations of quickly cutting interest rates.

The president has spent years railing against Powell and trying to undermine him for what he sees as Trump’s stubborn refusal to cut interest rates faster and deeper than the Fed is willing to do. But now that Warsh has been confirmed as chairman and faces the first rate-setting Fed meeting next week, Trump is starting to send signals that he won’t object if Warsh doesn’t cut rates immediately.

Market expectations overwhelmingly support the Fed keeping the short-term interest rate steady in the 3.5%-3.75% range, as it has been since December. The Iran war has driven up energy prices since March as tankers have largely been unable to pass through the Strait of Hormuz chokepoint between the oil-rich Persian Gulf and the rest of the world. Several Fed officials are present, including Dallas Fed President Lorie Logan and Cleveland Fed President Beth HammockThey recently said they preferred not to cut interest rates now and actually thought increases might be appropriate this year.

According to consumer price index data announced on Wednesday, inflation increased by 4.2 percent in May compared to the previous year. That’s a sharp increase, but Fed officials tend to break down the data in a way that makes the impact seem more muted. Core CPI inflation, which excludes energy and food, increased by only 2.9%.

Warsh has spent much of 2025 arguing that advances in artificial intelligence are a good reason for the Fed to cut interest rates. But “inflation risk is still a topic talked about around kitchen tables and boardrooms,” he said at his confirmation hearing in April. Until this situation subsides, interest rate cuts are likely to be off the table.

While the Fed would normally be expected to raise interest rates as inflation accelerates, Warsh said events like the Iran war are different. “What I’m most interested in is what the underlying inflation rate is; not the one-off change in prices because of a change in geopolitics or a change in beef prices, but what the underlying generalized change in prices is in the economy.” Warsh said at the hearing.

In Fed lingo, this is called “examining” the supply shock; Allowing a one-time problem like the Iran energy shock to work its way through the system, even if that one-time problem lasts longer than originally promised.

On Wednesday, Trump agreed. In response to a reporter’s question, Trump said the latest inflation numbers were “great.”

Regarding inflation, Trump said, “When the war is over, it will drop. It will drop like a rock.”

This dovetails with comments Trump has made on more than one occasion, suggesting that Warsh would allow him to act unimpeded on interest rates despite Trump’s long-running campaign for Powell to lower interest rates.

Trump says he wants higher interest rates NBC News interview It was published on Sunday. But he also wants Warsh to “do whatever he wants, and I don’t want to have a big influence on him.”

Trump made similar comments at Warsh’s swearing-in ceremony at the White House on May 22. “I want Kevin to be completely independent,” Trump said at the time. “Just do your own thing and do a great job.”

These remarks represent a sharp U-turn from what Trump has said about Powell and, more importantly, from what he has done to get Powell to change. Trump said he wanted interest rates to be cut to 1 percent and Powell did not cut them out of spite. “I think he hates me,” Trump said of Powell last year, calling the Fed chairman a “stupid.”

Powell later said he wasn’t bothered by what Trump said. However, the president was not satisfied with naming names. He tried to fire Fed Governor Lisa Cook over allegations that she cheated on her mortgage. (He fought back in court, and the Supreme Court is expected to rule on the issue soon.)

Trump also said the Fed was “to blame” for cost overruns on office renovations. U.S. Attorney for the District of Columbia Jeanine Pirro opened a criminal investigation into the expenses and Powell’s testimony to Congress on the matter. A judge has blocked his subpoenas in the case and is expected to rule soon on Pirro’s subsequent request to toss out the entire case.

The result of these attempts to influence Powell may be that Trump leaves himself with fewer tools to take advantage of Warsh if he so chooses. But Warsh took office and publicly said he was willing to listen to the president on interest rates, but that call would be up to the Fed.

The White House did not respond to an email Wednesday asking whether Trump and Warsh had talked about inflation. But Warsh was in contact with management. He and Treasury Secretary Scott Bessent spoke during the confirmation process, and after Warsh was voted in, the two started quickly With the tradition of regular meetings between the Fed chairman and the Treasury secretary.

All of this represents a sort of political honeymoon for the new Fed chairman. Exactly how he wants to use this will begin to become clear next week. The Fed said Wednesday that the president will hold his first news conference on time for June 17.