How Many Temporary Shocks Make a New Inflation Trend?

Inflation rose faster than expected in April, thanks to higher gas prices due to the war with Iran. The numbers pose a challenge to incoming Federal Reserve Chair Kevin Warsh: Appointed by a president who favors lower interest rates regardless of economic conditions, Warsh must convince colleagues and financial markets that he’s committed to price stability.

With luck, the price spike will be short-lived. If inflation expectations remain anchored, the Fed shouldn’t need to hit the labor market with a higher policy rate. Yet that “if” needs to be watched very closely.