The recent inflation readings have led to a drop in expectations that the Federal Reserve would raise interest rates at its policy meeting later this month, with markets now pricing in a 10.2% chance for a hike of at least 25 basis points, down from more than 40% on Monday, according to CME Group's FedWatch tool. Expectations for an increase at the September meeting, however, are still roughly 50%.
Top Fed officials, including Warsh, on Tuesday welcomed the cooler CPI data, but said they would need more such readings to feel confident that price pressures are truly easing.
Warsh on Wednesday told U.S. lawmakers he feels the Fed is not meeting its price-stability mandate, but declined to give any specifics on how or when he would address the issue.
On Wednesday, New York Fed President John Williams said that while inflation is "unquestionably too high," there are reasons to believe it may have crested and should soon start subsiding, with monetary policy well positioned to guide inflation back to the central bank's 2% target.
Federal Reserve Governor Lisa Cook took a more hawkish stance, and said she is "prepared to act" if inflation does not soon begin to slow, though she is willing to wait "a bit more time" for that to happen.
The Fed said in its latest "Beige Book" report that economic activity increased slightly in recent weeks, employment rose, and companies and households indicated that inflation may have improved.
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