Sintra remarks from new Fed Chair Kevin Warsh signaled the central bank will stay independent and keep price stability at the center, a stance that likely shuts the door on the rate cuts Donald Trump has pushed.
Warsh said anyone expecting the Fed to tolerate inflation above 2% would be disappointed, though he refused to preview the next move and said the tactics are still to come.
Markets still see a possible hike by September, with the policy rate now around 3.6% and nearly half of the Fed's 19 policymakers backing higher rates this year at the June meeting.
May inflation hit 4.2% after the Iran war lifted gas prices, but falling energy costs and lower inflation expectations suggest price pressures may have peaked, potentially letting Warsh avoid an early hike.
A jobs report due Thursday is expected to show unemployment holding at 4.3%, while Warsh argues AI could ease inflation over time even as current AI investment is raising equipment costs.