FEATURED

A New Fed Chair, A Hot Inflation Number, and Five Days of Data

Hey there, bargain hunter.

Kevin Warsh officially became the 17th chair of the Federal Reserve on May 15 – confirmed in a 54-45 Senate vote that was the most partisan in Fed history. He walked into the job carrying a 3.8% inflation rate, oil running above $100 a barrel, and a rate-setting committee that just logged its most divided vote since 1992. This week, the data starts filling in the picture.

What Warsh Inherited

The April CPI came in at 3.8% year over year – the highest reading since May 2023 – driven largely by energy costs that jumped 17.9% annually as the war with Iran chokes supply through the Strait of Hormuz. Core CPI, which strips out food and energy, ran at 2.8%. Neither number gives Warsh room to maneuver on rates anytime soon.

At the April 28-29 FOMC meeting – Powell’s last as chair – the committee held the fed funds rate at 3.50%–3.75% for a third straight meeting. The vote was 8-4. One member wanted a cut. Three others opposed language in the statement that even hinted at future easing. That kind of internal friction doesn’t resolve itself when a new chair walks in.

Traders are currently pricing in rates on hold through year-end, with the odds of a hike rising to roughly 30% by December.

Wednesday Is the One to Watch

The April FOMC meeting minutes drop Wednesday, May 20, at 2:00 p.m. ET. These are Powell’s final minutes as chair, and they matter more than a typical release. With four dissents on the record, the minutes will show exactly where the fractures inside the committee run – who wanted to signal hikes, who pushed for cuts, and how far apart the center of the committee actually is from both flanks. That read-through matters for how Warsh manages consensus at his first meeting on June 16-17.

The Rest of the Week

• Monday (5/18): NY Fed Business Leaders Survey and SCE Household Spending Survey. Services-sector tone at a time when services inflation is doing the quiet damage.
• Tuesday (5/19): New Residential Construction and NAR Pending Home Sales. Housing has been grinding under rate pressure for months – any further softness here reinforces the hold argument heading into June.
• Thursday (5/21): Initial Jobless Claims and the Philadelphia Fed Manufacturing Survey, plus flash PMI readings for May. Claims have been running between 190K–215K recently – the labor market is still holding. The PMIs will be the first real read on May economic momentum.
• Friday (5/22): Final Michigan Consumer Sentiment for May. Consumer confidence has been deteriorating under the weight of gas prices averaging $4.50 a gallon nationally. A weak reading here could close the week on a sour note for equity markets.

None of this week’s data moves the Fed before June. But it shapes how loud the rate hike conversation gets by then – and with EY already flagging CPI could push past 4% in May, that conversation is getting louder whether markets want to hear it or not.

Stay sharp.

– The Cheap Investor