Inflation has become the dominant concern as disinflation progress stalled and inflation measures reaccelerated. The U.S. labor market remains stable, but headline and core PCE inflation rose in April 2026, with headline PCE increasing to 3.77% year over year and core PCE to 3.29%. Services inflation has stayed elevated within a narrow range tied to wages and rent. Some Fed officials indicated greater willingness to consider rate hikes, reflecting a shift in the policy “Overton window.” The transition to Kevin Warsh also raised concerns about a mismatch between the Fed’s statement language and the current majority preference.
"“The U.S. labor market, it's been quite stable, and the thing that is going wrong is inflation. Stop. It was making progress. It stopped making progress last year and now has been rising. It's the wrong way. So I'm more attuned to the inflation risks in the immediate term than to the labor market risks.”"
"“I am focusing heavily on inflation. I'm not ignoring it all the labor market. We need to pay attention to both sides. But the labor market is in decent shape right now, while inflation is simply much too high.”"
"“Lisa Cook, a 2026 voting governor, went further: she said she could consider hiking rates, a phrase Fed officials had not been using at all. The Overton window on the FOMC has shifted, quietly, in a few weeks.”"
"“It is interesting that Powell hands off to Warsh a Fed that's still technically has that subtle easing bias in its statement. And I'm pretty sure that's not where the majority of the Fed is right now.”"
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