Kevin Warsh was handed a life raft this morning when the government reported a stark decrease in inflation last month — the largest drop since the pandemic — just before the newly installed Fed chair sat for a grilling before members of Congress. His message to lawmakers: There’s still work to do. “There might be some that look at this morning’s data and say ‘Oh, mission accomplished, everything is swell,’” Warsh told the House Financial Services Committee. “That is not my view.” The Fed chair acknowledged inflation “has been an undue burden on American households and businesses.” He promised that, “if we can get monetary policy right — and I can assure you we will — the inflation surge of the last five years will be a thing of the past.” Today’s lower-than-expected inflation reading — which saw the consumer price index fall 0.4 percent in June — was driven by plummeting energy prices, which outpaced rising prices in other areas like housing and food, notes POLITICO’s Victoria Guida. “But it’s difficult to predict whether this improved picture will hold, particularly since the U.S. has restarted hostilities with Iran, prompting oil prices to once again surge,” she writes. Oil prices hit a one-month high this morning following the cessation of the ceasefire with Iran and Trump’s declaration yesterday that the U.S. would become “guardians” of the Strait of Hormuz and charge ships traveling through the waterway — which accounts for about a fifth of the flow of all the world’s oil — a 20 percent fee. TACO Tuesday: With oil prices ticking higher and higher, Trump backtracked on that plan this morning. “Oil is flowing like never before,” Trump claimed, adding the strait would be “open to ALL Ship traffic except for Iran.” He said he’d replace the 20 percent cargo fee with “Trade and Investment Deals” with various Gulf states, which he claimed “will create additional millions of High Paying AMERICAN Jobs!” “The report was incredible,” the president told reporters today in the Oval Office. “Inflation is way down, that means prices are coming way down, and we’re doing a great job.” Trump paused for a moment, then stared into a nearby camera — suddenly seeming alert to the political line to which Republicans are trying to cling. “Remember that for the midterms,” he said. Good Tuesday afternoon. Thanks for reading Playbook PM. Drop me a line at isentner@politico.com.
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