Reprieve for Federal Reserve as US prices cool easing the pressure to raise interest rates

See more This is Money on Google - save us as a Preferred Source Updated: 17:00 EDT, 12 August 2026 The new head of the US Federal Reserve is set to avoid a clash with Donald Trump as cooling inflation eases pressure on the central bank to raise interest rates.Official figures yesterday showed consumer prices climbed 3.4 per cent in the year to July – down from 3.5 per cent the previous month.The drop suggested the Fed and its new chairman Kevin Warsh will keep US interest rates in the range of 3.5 per cent to 3.75 per cent next month.That would avert a clash with Trump, who has argued for lower rates since becoming president.‘No nasty surprises means Warsh can maintain his wait-and-see bias,’ said Matt Cornwell, a portfolio manager at Nedgroup Investments. The report followed news last week of surprise job losses in July, and suggested limited effects of the oil price shock sparked by the Middle East conflict. Rates relief: A fall in US inflation suggests the Fed and its new chairman Kevin Warsh, pictured, will keep US interest rates in the range of 3.5% to 3.75% next monthBut economists said a rate rise remained on the table as inflation was above the Fed’s 2 per cent target.‘The report should further ease the Fed’s fears about an energy-driven inflation spiral,’ said Scott Anderson, chief US economist at BMO Capital Markets.‘The Fed will need to see more evidence that core services inflation is truly moderating before they take their rate hike threat completely off the table.’DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you