Why Kevin Warsh should think twice about hiking interest rates — even as anxiety over the Iran war grows

• US CPI inflation slowed to 3.5% year-over-year in June from a peak earlier in the year, with core inflation (excluding energy) at 2.7% - close to January's 2.6% and near the Fed's goal
• US M4 money supply grew 6.9% in May, near the 5.6% historical average and far below the 30.4% peak in June 2020 that Fisher blames for 2022's inflation surge
• Global money markets have priced in a quarter-point Fed rate hike by September, with the ECB and Bank of England expected to follow, despite Fisher's warning that aggressive hiking could flatten yield curves and choke economic growth

Summary: Fed Urged Against Rate Hikes Amid Inflation Concerns

Financial analyst Ken Fisher warns newly appointed Federal Reserve Chair Kevin Warsh against raising interest rates, arguing that current inflation fears are overblown and driven by flawed central bank thinking.

Key Arguments

Fisher contends that rising oil prices alone don't cause broad inflation, instead driving consumer substitution away from non-essential goods. U.S. CPI inflation rose from 2.4% in January to a peak before declining to 3.5% year-over-year in June as energy prices fell. Critically, excluding energy, June CPI stood at 2.7% versus 2.6% in January—near the Fed's target, indicating minimal core inflation pressure.

Market Context

Despite this, global money markets have priced in a quarter-point Fed rate hike by September. The European Central Bank has already raised rates, which Fisher calls "a mistake." Concerns stem from President Trump's Iran conflict, which pushed Brent crude above $100 per barrel recently, though still below April's $138 peak.

Central Bank Critique

Fisher blames the 2022 inflation surge on central banks' massive money supply expansion during COVID-19, when U.S. M4 money supply hit 30.4% year-over-year growth in June 2020. Currently, M4 growth stands at 6.9%, near the 5.6% historical average—suggesting no inflation threat.

Yield Curve Warning

The U.S. yield curve currently shows a healthy 0.8 percentage point spread (up from 0.5), indicating bullish conditions. However, aggressive rate hikes could flatten or invert the curve, choking lending and potentially triggering economic and stock market declines. Fisher advocates maintaining current policy rather than preemptive tightening based on commodity volatility.