US yields face CPI test before Warsh testimony

U.S. rates markets face a two-part policy test this week, with June CPI due Tuesday at 8:30 AM ET before Federal Reserve Chair Kevin Warsh begins semiannual testimony on Capitol Hill. Reaction pending. The data could shape expectations for whether the Fed can stay on hold, prepare for eventual easing, or keep policy restrictive for longer.

Economists expect headline CPI to rise 0.1% month over month, slowing from 0.5% in May. The annual rate is expected to ease to 3.8% from 4.2%, while core CPI is forecast to rise 0.2% on the month and cool to 2.8% from 2.9% from a year earlier.

CPI print frames Warsh testimony

Inflation remains above the Fed’s 2.0% objective, keeping pressure on policymakers to avoid declaring victory too early. The prepared report to Congress described an economy losing some household momentum but still supported by AI-related investment, productivity gains and a resilient labor market.

The central bank’s latest projections trimmed 2026 growth to 2.2% from 2.4%, while raising inflation forecasts to 3.6% for headline CPI and 3.3% for core CPI. The projected unemployment rate was lowered to 4.3%, suggesting officials see limited labor-market damage.

If CPI undershoots forecasts, Treasury yields and the dollar could fall as markets price a less restrictive policy path, supporting equities and precious metals. If inflation surprises higher, yields could rise as traders rebuild the case for tighter policy and mark down risk assets.

Warsh testifies before the House Financial Services Committee on July 14 at 10:00 AM ET, then appears before the Senate Banking Committee on July 15.