Wash Congress's debut collision CPI exploded cold! "Zero tolerance" testimony was unexpectedly attacked by data, and interest rate hike pressure instantly eased.

Federal Reserve Chairman Kevin Wash will attend the House Financial Services Committee's "Federal Reserve Semiannual Monetary Policy Report" hearing at 10 p.m. tonight, but his testimony has been released in advance. In his testimony, he stated that the Fed policymakers have "zero tolerance" for high inflation and reiterated their pledge to curb the prolonged high price growth. "Our committee members will never tolerate persistently high inflation," Wash said in his testimony. "And we share a resolute commitment to restoring price stability." The new Fed chairman, who took office in May, has been emphasizing policymakers' commitment to addressing inflation and stating that the primary goal is to ensure the correctness of monetary policy. "If we get our policies right - and we certainly will - then the skyrocketing inflation of the past five years will become a thing of the past," Wash pointed out. However, a dramatic turnaround occurred at 8:30 p.m. Just an hour and a half before Wash was preparing to deliver his hawkish testimony with a strong stance of "zero tolerance" at 10 p.m., the U.S. Bureau of Labor Statistics released the Consumer Price Index (CPI) report for June. This unexpectedly cold data was like a deepwater bombshell, directly disrupting the Fed's previous firm rhythm. The data showed that the U.S. June CPI declined by 0.4% month-on-month, far below market expectations of -0.1%, marking the first monthly decline in six years in the U.S.; the year-on-year growth rate also dropped to 3.5%, surpassing expectations. What excited Wall Street even more was that the core CPI, excluding food and energy, remained unchanged at 0.0% month-on-month (as expected +0.2%), and the year-on-year growth rate also declined to 2.6% (expected 2.8%). After the data was released, global financial markets immediately reversed course: U.S. stock index futures soared, U.S. Treasury bond yields plummeted, and investors began frantically cutting back on bets on a Fed rate hike in July. The report suggested that with President Trump's previous measures showing results, fuel prices at gas stations plunging sharply, and the initial energy shock from the U.S.-Iran conflict fading away. As Wash was about to make the above statement, several other Fed officials were issuing warnings that higher rates might be needed to curb inflation. However, as noted in the text, Wash's testimony for this hearing had been "prepared prior to" the release of this unexpectedly cooling CPI data. This sudden cooling data directly took away the trump card that the hawks originally planned to use to talk about rate hikes. In terms of economic outlook, Wash had previously been optimistic, describing the labor market as generally stable with almost no signs of layoffs and strong nominal wage growth. But Fed officials must also address potential risks. Although the data indicates that the worst impacts may be behind us, if there is a new hostile action between the U.S. and Iran in the near future, the risk of a second rebound in oil prices could prolong the aftereffects of this geopolitical conflict. Additionally, the Fed chief was more cautious about the AI boom. He stated that AI is driving a surge in business investment, but it is also bringing uncertainty to the economy. "We are not yet sure to what extent the economy will benefit from AI development," Wash said. "The new opportunities for economic growth also present policymakers with new challenges. We at the Federal Reserve are closely monitoring its impact on inflation and the labor market." Minutes from the Federal Open Market Committee's June 16-17 meeting reflected policymakers' increasing concerns about inflation. Officials unanimously voted to keep the benchmark interest rate in the range of 3.5% to 3.75% at that meeting. Accompanying that decision was the release of interest rate forecasts (dot plot), which showed nine officials predicting at least one rate hike of 25 basis points this year, with six expecting at least two rate hikes; nine other officials expected to keep rates unchanged or lower them. Wash, who has been critical of providing forward guidance to the markets, directly refused to submit his personal forecast this time. This series of hardcore data bombs before the hearing will undoubtedly put Wash in a hot seat at 10 p.m. In the subsequent question-and-answer session, facing this new evidence of the first month-on-month decline in inflation in six years, the chair who refuses forward guidance and refuse to fill out the dot plot will inevitably be questioned by lawmakers: Will the Fed still stick to its previous turn towards rate hikes?