Rising prices complicate Warsh’s first Fed meeting

Federal Reserve Chair Kevin Warsh will lead his first policy meeting in two weeks as rising inflation and slowing consumer demand create fresh challenges for the US economy.

The Fed’s recently released Beige Book showed that most regions experienced higher inflation from late April to late May, driven largely by energy costs linked to the Iran war. Higher fuel prices increased costs for shipping, packaging, groceries, and fertilizer, putting pressure on households and businesses.

The report found increased credit card use, fewer retail visits, and stronger demand for necessities, raising concerns about consumer spending, a key driver of the US economy. 

Businesses across several regions reported weaker demand, while some consumers delayed major purchases due to economic uncertainty.

At the same time, artificial intelligence investment continued to support growth. Nine of the Fed’s 12 regional banks said data center construction and AI projects boosted hiring and business investment.

Inflation rose to 3.8% in April, well above the Fed’s 2% target. Futures markets show traders see a roughly 75% chance of a quarter-point interest-rate hike by year-end.

The report also noted that AI adoption is slowing hiring for some entry-level jobs, while wage growth remains modest.