Warning not to underestimate US inflation threat

Mike Taylor

Managing Editor and Publisher

11 June 2026

Investors would do well not to underestimate the inflation threat in the US, according to deVere Group chief executive, Nigel Green.

The global financial advisory head noted that US inflation has jumped to 4.2% – the highest reading in three years and something which has dealt a serious blow to assumptions that the US Federal Reserve is edging towards lower interest rates.

The consumer price index for May was expected to show a 4.2% gain from a year ago, according to the Dow Jones consensus estimate but Green argues that “Just because the inflation numbers came in consistent with expectations doesn’t mean they are good.

“Indeed, it’s the first major inflation test facing newly installed Fed Chair Kevin Warsh, strengthens the case for a more hawkish central bank, and leaves investors dangerously exposed if they continue to underestimate the inflation threat.”

Green argues that the timing could hardly be more significant as Warsh heads into his first Federal Open Market Committee meeting as chairman with inflation accelerating, oil prices rising and the US economy continuing to show resilience.

Investors who expected the new Fed chief to inherit a rate-cutting cycle are instead confronting a markedly different backdrop.

Warsh begins his tenure facing the fastest inflation rate in three years and growing evidence that price pressures remain stubbornly embedded across the economy.

“Many investors assumed Warsh’s first meetings would revolve around the timing of rate cuts. Inflation has changed that calculation,” Green said. “A 4.2% CPI today reading puts the focus squarely back on price stability.

“Warsh understands that credibility is earned early. He is unlikely to begin his chairmanship by signalling comfort with inflation moving further away from target.”

The latest consumer price data marks a sharp acceleration from April’s 3.8% annual reading.

Core inflation also moved higher, underlining concerns that underlying price pressures remain persistent despite expectations earlier this year that inflation would continue to moderate.

The report arrives against a backdrop of strong employment, resilient consumer spending and rising energy costs. Oil prices have climbed amid heightened geopolitical tensions, adding another layer of inflationary pressure at the moment policymakers had hoped price growth was moving back under control.

“Inflation has reasserted itself in a way the Fed can’t ignore,” Green said. “Markets have spent months building a narrative around lower rates. Today’s figures demand a fundamental reassessment.”