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

A strange thing may happen in the coming days. Federal Reserve Chair Kevin Warsh may do exactly what his predecessor Jerome Powell had done about interest rates — only to get a completely different response from President Donald Trump.

Trump’s unexpected comments Wednesday on the latest inflation figure may give Warsh some space on interest rates.

“I love the inflation,” he said in the Oval Office hours after the Bureau of Labor Statistics revealed that annualized inflation jumped by 4.2%. If the president is unconcerned with the highest inflation in three years, that may buy Warsh a reprieve from expectations to quickly lower interest rates.

The president spent years railing against and trying to undermine Powell for what Trump saw as a stubborn refusal to cut interest rates faster and deeper than the Fed was willing to go. But now that Warsh has been confirmed as chair, and faces his first rate-setting Fed meeting next week, Trump is starting to send signals that he won’t object if Warsh doesn’t cut right away. 

Market odds overwhelmingly favor the Fed to hold its short-term interest rate steady at 3.5%-3.75%, as it has since December. The Iran war has since March raised energy prices, as tankers remain largely unable to transit the Strait of Hormuz chokepoint between the oil-rich Persian Gulf and the wider world. That has a number of Fed officials, including Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack, saying recently that they would rather not cut rates now, and in fact think increases might be in order this year.

Inflation jumped by 4.2% in May compared to the year before, according to consumer-price index data released Wednesday. That’s a sharp increase, but Fed officials tend to parse the data in ways that make that effect look more muted. So-called core CPI inflation, which excludes energy and food, was up only 2.9%. 

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

While the Fed might normally be expected to raise interest rates when inflation is speeding up, Warsh has said events like the Iran war are different. “What I’m most interested in is what’s the underlying inflation rate, not what’s the one time change in prices because of a change in geopolitics or change in beef, but what’s the underlying generalized change in prices in the economy?” Warsh said at the hearing. 

In Fed-speak, that’s known as “looking through” a supply shock — letting a one-time problem like the Iran…