Warsh Officially Takes Over as Fed Chair as U.S. Inflation Heats Up Again

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Summary:

The U.S. Senate approves Kevin Warsh as Federal Reserve Chair; U.S. PPI posts its largest increase since 2022...

Key Headlines

1. U.S. Senate approves Kevin Warsh as Federal Reserve Chair

2. U.S. jet fuel exports hit a record high to fill overseas supply shortages

3. EIA says oil flows through the Strait of Hormuz plunged nearly 30% last quarter

4. Bank of Canada remains alert to rapidly changing inflation dynamics

5. U.S. PPI records its largest increase since 2022, driven by rising energy costs“

6. Fed whisperer” discusses bill to reform the Fed’s mandate: new proposal would focus solely on fighting inflation

7. Collins: The Fed may need to raise interest rates to curb inflation

Details

U.S. Senate Approves Kevin Warsh as Federal Reserve Chair

On May 13 local time, the U.S. Senate officially approved Kevin Warsh as Chair of the Federal Reserve. The Senate had already confirmed Warsh on May 12 as a member of the Federal Reserve Board of Governors for a 14-year term.

With the chairmanship now approved, Warsh will formally assume office after completing the relevant White House signing procedures, replacing current Chair Jerome Powell, whose term is set to expire this Friday (May 15). However, Powell is expected to remain on the Federal Reserve Board as a governor.

U.S. Jet Fuel Exports Reach Record High to Offset Overseas Supply Shortages

As airlines around the world struggle to cope with the impact of the Strait of Hormuz closure, U.S. refiners have increased jet fuel shipments overseas to record levels.

According to the latest report from the U.S. Energy Information Administration (EIA), U.S. jet fuel exports surged to a record 455,000 barrels per day last week, surpassing the previous high set in early April.

Jet fuel prices in Europe and Asia have surged sharply, as airlines and refiners in these regions rely heavily on stable shipments of oil and other energy supplies from the Persian Gulf. Bloomberg-compiled data show that since the conflict began, jet fuel prices in Singapore and the European Union have risen by 61% and 59%, respectively.

EIA: Oil Flows Through the Strait of Hormuz Fell Nearly 30% Last Quarter

Crude oil and fuel flows through the Strait of Hormuz declined by nearly 6 million barrels per day in the first quarter, as the massive energy shock disrupted global supply systems and sent prices soaring.

According to data released Wednesday by the U.S. Energy Information Administration (EIA), average crude oil and petroleum liquids flows through the strait totaled about 14.6 million barrels per day during the first three months of the year. This was significantly lower than the 20.4 million barrels per day recorded a year earlier and below the 20.7 million barrels per day seen in the fourth quarter of 2025.

Shipping activity through the Strait of Hormuz has been largely paralyzed since the outbreak of the Iran war, disrupting roughly one-quarter of global seaborne oil trade.

Global benchmark Brent crude has surged more than 45% since the conflict began. In the United States, the national average retail gasoline price has climbed above $4.50 per gallon, hovering near its highest level since 2022.

Bank of Canada Remains Alert to Rapidly Changing Inflation Dynamics

According to the Bank of Canada’s latest meeting minutes, officials unanimously agreed that they must remain prepared to adjust interest rate policy quickly in response to developments in the Middle East and ongoing trade tensions with the United States.

Policymakers agreed that although the U.S.-Iran conflict has initially pushed up gasoline prices, they can remain patient for now and keep the benchmark interest rate unchanged.

The minutes stated that conditions could change rapidly, and monetary policy may need to respond to prevent inflation risks from becoming broader and more persistent. Inflation is expected to peak at around 3% in April, while crude oil prices are projected to fall back to around $75 per barrel by mid-2027.

U.S. PPI Posts Largest Increase Since 2022 as Energy Costs Rise

Data released Wednesday by the U.S. Bureau of Labor Statistics showed that the Producer Price Index (PPI) rose 6% year-on-year, exceeding all economists’ forecasts in the survey. The month-on-month increase was also the largest since 2022.

Core PPI, which excludes food and energy, rose 5.2% from a year earlier, marking the biggest increase in more than three years.

With Middle East tensions still unresolved and the ceasefire remaining fragile, businesses are attempting to pass rising energy and transportation costs on to consumers, putting upward pressure on prices for other goods and services.

The PPI report showed that goods prices, including fuel, recorded their largest increase since 2022. Energy costs rose 7.8% in April after an even larger increase the previous month.

Meanwhile, service costs rose 1.2%, the biggest gain in four years. Transportation and warehousing service prices, which are particularly sensitive to geopolitical conflicts, increased 5%, driven mainly by higher trucking costs and improved profit margins for fuel retailers.

“Fed Whisperer” Discusses Fed Mandate Reform Bill: New Proposal Would Focus Solely on Inflation

Nick Timiraos, often referred to as the “Fed whisperer,” wrote that the U.S. House Financial Services Committee is reviewing a bill aimed at amending the Federal Reserve Act by removing the Fed’s dual mandate and focusing exclusively on price stability.

The proposed legislation would amend Section 2A of the Federal Reserve Act (12 U.S. Code §225a) by deleting the phrase “maximum employment, stable prices” and replacing it with “stable prices.”

Timiraos noted that it is worth considering whether the Fed would still have chosen to cut interest rates last year if such legislation had already been in effect.

Collins: The Fed May Need to Raise Rates to Contain Inflation

Boston Fed President Susan Collins said Wednesday that the Federal Reserve may need to raise interest rates if inflation pressures fail to ease.

Although a rate hike is not currently the most likely scenario, Collins said it is possible that some additional policy tightening could become necessary to ensure inflation returns to the Fed’s 2% target in a timely and sustainable manner.

Collins added that the monetary policy outlook for the Federal Open Market Committee depends heavily on the duration of the Middle East conflict, noting that the longer the conflict continues, the greater the risks—particularly to inflation.

She said the current monetary policy stance is well positioned to adjust according to evolving economic conditions and risk balances. Given the current outlook and risk environment, maintaining a moderately restrictive policy stance for some time could prove important.

Today’s Key Events to Watch

14:00 (UTC+8) UK Preliminary Q1 GDP Growth Rate (YoY)

20:30 (UTC+8) U.S. April Retail Sales (MoM)

01:00 (UTC+8) Speech by Cleveland Fed President Beth Hammack

05:45 (UTC+8) Speech by New York Fed President John Williams

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