The new Fed chair Kevin Warsh received his first policy test on Thursday, and it wasn’t welcoming. The Iran war pushed the PCE index, the Fed’s preferred inflation gauge, to 3.8% annually in April, a nearly three-year high. For a central bank already walking a tightrope on rates, the timing couldn’t be worse.

• Up from 3.5% in March, energy led April’s price surge, but costs spread across housing, utilities, recreation, and dining — a sign that inflation moved well beyond the pump.
• With income growth running below inflation, Americans dipped deeper into savings — pushing the personal savings rate to its lowest level since the last inflation crisis in 2022.

The hot seat: Once inflation is factored in, real consumer spending barely moved in April, and markets have taken notice. Traders now price a 40% chance of a rate hike by December, up from just 3% in June. That puts Warsh in an uncomfortable spot, with data pushing one direction and a president loudly demanding the other. As far as first days go, Warsh has certainly seen better.