Tangle - A new Fed chair stares down inflation.

Episode Date: May 14, 2026

On Tuesday, the Bureau of Labor Statistics (BLS) released its Consumer Price Index (CPI) report for April, which showed an increase of 3.8% from a year earlier, slightly higher than economists’ expectations. The latest inflation figures represent the highest annual increase since May 2023, up from 3.3% in March. On a month-to-month basis, prices rose a seasonally adjusted 0.6% after rising 0.9% in March. Core inflation, which excludes volatile food and energy prices, rose 0.4% for the month, its highest pace since January 2025.Our latest Suspension of the Rules.Isaac, Ari and Kmele let loose a bit in today’s episode, discussing Sen. Rand Paul’s son hurling antisemitic remarks at Rep. Mike Lawler and Rep. Alexandria Ocasio-Cortez’s possible political ambitions. Plus, what were some lessons the media should have learned from the Covid-19 pandemic?Check out the latest here!Ad-free podcasts are here!To listen to this podcast ad-free, and to enjoy our subscriber only premium content, go to ReadTangle.com to sign up!You can read today's podcast⁠ ⁠⁠here⁠⁠⁠ and today’s “Have a nice day” story ⁠here⁠.You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here. Take the survey: How concerned are you about inflation? Let us know.Our Executive Editor and Founder is Isaac Saul. Our Executive Producer is Jon Lall.This podcast was written by: Will Kaback and audio edited and mixed by Dewey Thomas. Music for the podcast was produced by Diet 75.Our newsletter is edited by Managing Editor Ari Weitzman, Senior Editor Will Kaback, Lindsey Knuth, Bailey Saul, and Audrey Moorehead. Hosted on Acast. See acast.com/privacy for more information.

From executive producer Isaac Saul, this is Tangle. Good morning, good afternoon, and good evening. And welcome to the Tangle podcast, a place where you get views from across the political spectrum, some independent thinking, and a little bit of our take. I'm your host today, Senior Editor Will Keeback. Today we're going to be diving into the latest inflation report, which was just released this week and showed inflation running hot again for the second consecutive month, particularly driven by energy prices, which are of course being affected by the war in the Middle East. So we're going to look

into what those numbers tell us about where we could be headed, whether inflation will continue to get worse or whether this could be more of a blip on the radar, as President Trump has argued. We're also going to talk about how the current summit between President Trump and Chinese President Xi Jinping in China could affect the trajectory of the war, and as a downstream consequence of that, inflation and global prices and the oil markets. Before we get into all of that, wanted to share that we have a new episode of Suspension of the Rules releasing today. This was one in which Isaac and Ari and Camille let a little bit more loose than normal. I know they're typically pretty loose on the show, but I think you'll enjoy the tone

of this ones in particular. This one had a lot to discuss. Most recently, a report that came out yesterday that Senator Rand Paul's son hurled anti-Semitic remarks at Representative Mike Lawler in front of a reporter in Washington, D.C., recently. They also talked about Representative Alexandria Ocasio-Cortez's potential political ambitions, as well as some of the lessons that the media should have learned from the COVID-19 pandemic, but perhaps did not. So please head over to our YouTube to check it out. We'll also post it on our podcast page if you prefer to just listen there.

But it's out now, so go check it out and hear another. great discussion from the guys this week. All right, now I'm going to be taking us through the full podcast today. So settle in. We're going to jump in with quick hits first, and then we'll get into our main story. So here are today's quick hits. Number one, a Democrat-led resolution to pause the conflict in Iran unless Congress authorizes further military action, failed by a vote of 49 to 50 in the Senate. Republican senators Lisa Murkowski from Alaska, Susan Collins from Maine, and Rand Paul from Kentucky voted with Democrats to pass the resolution,

while Senator John Federman, a Democrat from Pennsylvania, was the lone Democrat to vote against it. Number two, President Donald Trump arrived in China for a two-day summit with Chinese President Xi Jinping. Xi told Trump that discussions between the U.S. and Chinese economic and trade teams had been, quote, balanced and positive, but said relations between the countries could be imperiled

if the U.S. interferes with China's policy on Taiwan. Number three, the South Carolina Supreme Court overturned Alex Murdoch's conviction for murdering his wife and son, finding that the county clerk of the court where Murdoch was tried, improperly influenced jurors during the trial. Prosecutors intend to retry Murdoch, and he will remain in prison while serving a separate sentence for financial crimes. Number four, Vice President J.D. Vance announced that the Trump administration is deferring $1.3 billion in Medicaid payments to California,

saying that the state has not taken sufficient measures to combat fraud. The vice president warned that other states could also lose funding if they do not address Medicaid fraud. And number five, the number of surveillance flights conducted near Cuba by U.S. military and intelligence agencies has reportedly increased in recent weeks, which U.S. officials said was part of a planned military buildup in the Caribbean in the near future. U.S. inflation rose to its highest level in three years in April, driven by surging energy

and food prices linked to the war with Iran. The Labor Department's Consumer Price Index released Tuesday increased 0.6 percent last month. That put the annual inflation rate at 3.8 percent, the highest since May of 2023. marked the second straight month that U.S. prices increased sharply. On Tuesday, the Bureau of Labor Statistics released its Consumer Price Index report for April, which showed an increase of 3.8% from a year earlier, slightly higher than economists' expectations. The latest inflation figures represent the highest annual increase since May 2023 and up from 3.3% in March. On a month-to-month basis, prices rose a seasonally adjusted.

0.6% after rising 0.9% in March. Core inflation, which excludes volatile food and energy prices, rose 0.4% for the month, its highest pace since January 2025. As a quick refresher, the consumer price index or the CPI tracks price fluctuations for about 80,000 items in a fixed basket of goods and services, representing everything from gasoline to apples to the cost of a doctor's visit. A 3.8% surge in energy prices accounted for over 40% of the monthly increase for all items, while food prices climbed 0.5% and the shelter index rose 0.6%.

Airline fares, household furnishings, education, and apparel prices all increased in April, while medical care, new vehicles, and communication service prices declined. Separately, the producer price index, which measures the average change in selling prices received by domestic producers, rose a seasonally adjusted 1.4% for the month, its largest monthly gain since March 2022, and was up 6% on an annual basis. Lastly, on Wednesday, the Senate confirmed Kevin Warsh to be the next Federal Reserve chair by a 54 to 45 vote. Warsh, who is 56 years old, served on the Fed's Board of Governors from 2006 to 2011 as its youngest ever governor, and he acted as a key liaison to Wall Street during the 2008-2009 financial crisis.

Warsh is set to take over from current Federal Reserve Chairman Jerome Powell, whose term ends on Friday, May 15th. President Donald Trump announced his nomination of Warsh in January, but Senator Tom Tillis, Republican from North Carolina, blocked the nomination from advancing until after the Department of Justice dropped its probe into Powell for the cost of the renovation to the Federal Reserve's headquarters. During his confirmation hearing, Warsh faced intense scrutiny from the Senate Banking Committee over whether he would maintain the Federal Reserve's independence from President Trump,

who was publicly pushed for aggressive interest rate cuts and criticized Chairman Powell for opting to keep rates unchanged amid inflation concerns. The Federal Reserve Open Market Committee will next meet to decide on interest rates on June 16th. Today we'll get into what the right and left are saying about the latest economic news, and then I will give my take. We'll be right back after this quick break. Here's what the right is saying. The right is largely mixed on the economic figures

with some criticizing Powell and hoping Warsh can take a different path. Some fault binomics for the bad inflation numbers. Others point out that voters are beginning to blame Trump for high prices. The Wall Street Journal editorial board wrote about Jerome Powell's inflation legacy for Kevin Warsh. Warsh may be wondering why he ever signed up for this duty. Tuesday's consumer inflation data for April show he is inheriting one of the most difficult monetary tasks since Paul Volker took over from G. William Miller in 1979. Some 40% of the consumer price increase was related to the Iran war's energy shock.

But that's little consolation since so-called core prices, Sons Food and Energy, rose 0.4% in April, an acceleration from 0.2% in March and 2.8% for 12 months. The latest inflation report marks a dispiriting end to Jerome Powell's eight-year tenure as Fed chair. The press focuses mainly on President Trump's relentless attacks on Mr. Powell and praises him as a stalwart of Fed independence. We've supported him against those unfair assaults, but Fed chiefs are measured above all by their stewardship of the economy, especially price stability. On those grounds, Mr. Powell's tenure has been a notable failure. The real challenge for Mr. Warsh will be navigating the economic reality he inherits of renewed inflation, an oil shock affecting consumer confidence, and a president who always wants lower interest rates, but higher tariffs. In the New York Sun, Stephen Moore said, blame Bidenomics and big government for today's stubbornly high inflation.

The new consumer prices report showing a 3.8% price increase in April confirms what Americans have been complaining about for months. Inflation is squeezing family budgets. Oil and fertilizer supply disruptions in the Middle East are driving up prices here at home. Yet that's only part of the inflation story. Consumer prices overall are up nearly 30% since COVID-19 derailed the American economy six years ago. It's important to remember why this. spurt of rising prices has hit consumers right in the nose or wallet if we're going to solve the affordability crisis. If you're angry about the high price of nearly everything,

Bidenomics is the primary villain. During COVID-19 and its aftermath, Uncle Sam spent more than $4 trillion. Remember the Build Back Better Act, Chips and Science Act, inflation reduction act, and other, quote, stimulus bills? Every penny of that spending blitz was borrowed and essentially printed. Here's the impending political and economic danger for Republicans, though. The solution isn't just to get oil flowing through the Persian Gulf. We also have to reduce government spending right now. If Republicans don't start watching their peas and cues, as the old saying goes,

we could see another Biden-type inflation surge with voters mad as hell. In Cato, Ryan Bourne, Jai Kediatab and Nathan Miller wrote, President Trump's approval on inflation is now worse than President Biden's ever was. The economist UGubs May 1 through 4th poll shows 25% of Americans approve of the way Donald Trump is handling inflation and prices, while 69% disapprove, a net of negative 44% lower than any point in either Biden or Trump's presidencies. That's a remarkable development. Biden oversaw an inflation peak of 9%, which Trump hasn't yet. yet approached. Yet Trump's disapproval has surpassed Biden's worst. Voters don't just want lower inflation, though. They want prices to fall. More recently, inflation has accelerated again.

The consumer price index increased 0.6% in April after rising 0.9% in March, meaning prices are up 3.8% in the past year. Some of those price rises were to be expected. Warren, Iran, has driven gasoline prices 28.4% above year ago levels. and that mostly explains the 20.7% surge in the highly salient airline fares. But the concern with oil shocks is that they can pass through into virtually all other prices. These numbers are particularly problematic for Trump, given that this is an election year where affordability will be at the forefront of voters' minds. Now here's what the left is saying.

Many on the left argue that the latest inflation numbers are directly caused by the war in Iran. Some argue that the economy is worse for consumers than for large companies. Others say the Fed's power to affect the economy is diminishing, and new Fed chair Kevin Warsh can't change that. In Bloomberg, John Authors said Warsh could find inflation too hot to handle. U.S. inflation is too hot for comfort. The numbers for April reveal that the headline rise in consumer prices reached 3.8%, continuing an upward trend that started before the Iran war.

The greatest problem is, of course, the spiking energy prices driven by the blockage of the Strait of Hormuz. Energy prices are always erratic, and there is little monetary policy can do to affect them, which is why central banks tend to look at core inflation. However, inflation excluding energy is still rising, while an array of other statistical measures of core price increases are also turning upward.

fittingly, the inflation data dropped just as the Senate confirmed Kevin Warsh as a governor of the Fed to replace the ultra-Trumpie Stephen Myron. He arrives just in time for two-year treasury yields to touch 4%, their highest since June last year, buoyed by the strong market expectation that the Fed funds rate cannot move far from where it is now. There are worse inheritances for Warsh. The AI shock is strong enough to help the stock market withstand interest rates where they are, while the combination of rising inflation and stable employment should be enough to convince even the current administration

that lower interest rates are not called for just now. In MS Now, Ali Valshi argued that for many Americans, the recession is already here. The old-fashioned way of thinking about a recession is that it's two consecutive quarters of negative growth in gross domestic product, GDP being the broadest measure of all economic activity in the country. Not only is that view of a recession outdated, it also may not fit an economy that for a whole lot of Americans is already feeling like one that's in a recession.

In May, consumer sentiment was the worst it has ever been. So what's going on? The simplest way to understand it is this. There isn't one American economy right now. There are two. Economists call this a K-shaped economy, because if you draw it on a chart, the line for wealthier households invested in the state. stock market is going up, the top of the K. And the line for everyone else is flat or going down. That's the bottom. Across every income group, real spending has actually turned slightly negative

in recent months. So what's holding that number up? Well, two things. The first is the government. Defense spending crossed $1 trillion this year, roughly a 15% jump from the year before, driven in large part by the war with Iran. The second is a major economic boom in a single narrow sector. companies pouring money into building data centers for artificial intelligence. In semaphore, Liz Hoffman wrote, the Fed's most powerful economic lever is losing its edge. Kevin Warsh is signaling a willingness to lower interest rates, either because the president wants him to

or because he thinks current conditions justify it. It's not entirely up to him, and the market is losing faith in that outcome anyway, but the bigger question is whether it would matter. the U.S. economy is less sensitive to interest rates than it used to be. The long shift from manufacturing, which responds to higher borrowing costs in a way that services don't, has blunted one of the Fed's most powerful economic levers. The ultra-rich, whose spending has ballooned, don't care what money costs. Neither do the tech companies fueling the AI boom. Another kink in that policy transmission hose is that the Fed only controls overnight interest rates, not the longer-term levels that determine. and what money costs in the real economy. Expectations of inflation, if you're a pessimist, or growth, if you're an optimist, have kept longer-term borrowing costs higher than you'd expect after six rate cuts.

The economy is being tossed around by supply shocks, which central bankers can't control, rather than the demand shocks that they can. The Iran War is a shock to the supply of oil. AI is a shock to the supply of knowledge. The Trump administration is a shock to the supply of knowledge. supply of certainty. Put it together and central bankers are pushing on a string and getting less bang for their buck on interest rates. All right. That is it for what the right and left are saying. Now here's my take. Economic policymaking is hard and it has a tendency to make even the smartest

decision makers look out of their depth when predictions don't pan out. Tangle has always covered debates about the health of the economy. And I can honestly say, whether I've been a reader, researcher, editor, or writer for those editions, I typically come away struggling to figure out which compelling theories I find most persuasive. But every so often, the data from moments like this one tell a clear, simple story. The war in Iran has disrupted global energy markets, driven up prices, and led to rise in inflation here in the United States. It's that simple. And unlike say the debate over Bidenomics or the tax policy put forward in the one big beautiful bill last year, this interpretation doesn't seem to be a source of disagreement.

Now, opinions do vary on whether the potential benefits of attacking Iran justify this disruption, but there's no longer much debate that this war is directly responsible for heightened economic pain. The question now is how bad it will get and for how long. To state the obvious, the longer the war lasts, and the straight of Hormuz from effectively closed, the longer inflation will remain a problem. As Isaac documented in his take on Tuesday, the productivity of peace talks and the length of the conflict is difficult to gauge, but President Trump's recent comments suggest the fighting could soon ramp back up. Additionally, new reports about Iran's regained missile capabilities suggests they aren't ready to fold anytime soon either.

Alternatively, the U.S. and Iran could soon reach a deal that reopens the Shade of Hormuz and restore some degree of stability to global markets. President Trump is currently meeting with Chinese President Xi Jinping at a high-stakes summit in China, where the two are expected to discuss the war. China is playing a behind-the-scenes but pivotal role in the conflict right now. It's reportedly planning to provide Iran with weapons and could benefit from selective exceptions to Iran's shutdown of the street. A Chinese supertanker sailed out of the Persian Gulf yesterday, and now that ship is testing the U.S. Navy's blockade. This drama on the high seas raises the stakes of the rare face-to-face standoff between the two superpowers. Secretary of State Marco Rubio said Trump will push Xi to take a

more active role in mediating an end to the conflict, saying, quote, it's in their interest to resolve this. Rubio is alluding to the economic pain China will continue to experience if the Strait of Hormuz remains closed, but that's only one input that China is weighing. The longer the U.S. remains engaged in Iran, the more the U.S. military's resources will be depleted. Plus, with each passing day, Trump's domestic political challenges become more acute. Xi and China are ultimately balancing their own economic challenges against the strategic benefit of a weakened United States. But even in the best-case scenario, where the Trump-Zi summit produces a deal to pressure Iran to reopen the strait, inflation will likely get worse before it gets better. Energy markets have suffered

massive shocks now, the kind that don't immediately rebound as soon as Trump or really any other power declares that the war is over, or even after the straight reopens. An analysis from Oxford Economics published in April found that inflated oil costs caused by conflicts persisted for two to three years. In the Ukraine war, a more recent example, fuel prices in the U.S. remained elevated for roughly a year after Russia's full-scale invasion, and then they moderated to pre-war. levels. Now, that is encouraging because it suggests that energy markets can absorb the effects of upheaval over time. But it's also deeply discouraging because a year of rising gas prices is a long time. And we still don't know how bad the Hormuz crisis will get. Many Americans cannot or will not

tolerate $4.50 gas or worse for an extended period of time, which creates an obvious political problem for the president and his party as we approach the midterms. Trump recently commented that he, quote, doesn't think about Americans' financial situation in relation to the Iran war. Now, that makes for easy fodder for attack ads from Democrats, but I'm also not sure how true it is behind the scenes. More likely, the White House hasn't figured out how to reconcile the president's insistence on continuing the war with a coherent strategy for our mounting economic challenges.

But if inflation runs hot for another month or two or three or worse, there will be no hiding from political reality in November. In fact, that reality is probably already here. As Zachary Basu wrote in Axios this week, Trump is facing a five-alarm economy. Surging prices, shrinking paychecks, mounting debt, cratering consumer confidence, and increasing pessimism among small businesses. And despite their redistricting gains, Republican, Republicans will probably lose the House anyway, and you can draw a straight line from rising prices to that forecast. What's more, the president seems to have learned little from his predecessor, whose administration suffered politically for downplaying inflation and casting it as transitory.

Again, the connection between the Iran war and inflation is obvious, and that's to say nothing of the impact of Trump's tariffs, which are increasingly obvious too. And publicly, the president seems deeply indifferent to the pain that this conflict is causing. You can forget the politics of it all or the midterm forecasts. The posture that he's taking is just plain aggravating to me as a citizen. Personally, the most unnerving aspect of our economic outlook at this moment is how clearly it demonstrates the fragility of the systems that make our lives normal, an understanding that was laid bare during COVID and now feels like a wound being reopened. Consider these stories from just the past week, a massive Japanese snap

company is switching to black and white packaging because the Iran War has disrupted supplies of an ingredient used in its typical packaging ink. The cost of food staples like tomatoes has risen up to 30% from pre-war levels, largely because of diesel prices. Healthcare supply chains have been similarly impacted. Auto industry insiders are warning that we're weeks away from mass shortages of motor oil, and virtually all forms of transport, not just cars, are getting significantly more expensive. And as we wrote about last week, a U.S. airline just shut down, unable to weather rising jet fuel costs. Taking a step back, my three years working at Tangle have instilled a kind of reflex to check myself when I start to default to worst-case scenario

thinking. But when I try to find optimistic outlooks here, I'm not seeing many compelling arguments. In our research for today's edition, the most pointed defenses of the economy boiled down to essentially blaming President Biden and arguing that Trump can bring down inflation by going after grocery price gouging. The first is an admission of the situation, while the second is a potential solution to only one element of the problem and one that's pretty far down the priority list at the moment. wherever it is that we're headed, the big new variable in the mix is, of course, Kevin Warsh. When we covered his nomination back in February, I wrote that his singular focus on containing inflation as a Fed governor made him an intriguing candidate to lead the central bank at a time when the president was pushing aggressively for interest rate cuts. That was before we attacked Iran and before the March and April inflation reports.

Now Warsh's inflation curbing instincts could be well suited for this moment, but they could quickly bring him into conflict with President Trump as well. Will he buck the president if inflation continues to spiral? Or will he come to heal and push for rate cuts? It does feel a little odd to ask these questions about someone assuming a position that's supposed to be fully independent of the president. But after the way Jerome Powell's term ended, it's necessary to consider his replacement's fealty to the White House.

Ultimately, President Trump's anti-inflation strategy hasn't arrived yet. And the new Fed share will have an important role to play in whether the president can execute it. We'll be right back after this quick break. All right, that is it for my take. And I'm going to hand it over to managing editor Ari Weitzman for today's audience question. Ari, over to you. Thanks, Will. Today's reader question is about the take that I wrote yesterday about hauntavirus.

Eric from Elkridge, Maryland asks, For a few weeks, it has seemed to me that the press is repeating what officials tell them about pont virus with very little questioning, which is concerning. Your take doesn't seem to shift much from that. Listed as a fact is, quote, it transmits through what every medical source I've read describes as close contact with an infected person, end quote. So we the public hear that, but then see an increasing number of positive cases being identified. These two so-called facts seem at odds. How did such a range of passengers get this if close contact was required? Thanks for the question, Eric. And this may be a quibble, but I would say the press has actually done a lot of questioning.

The writers we summarized from the right and left, along with the epidemiologists we quoted, all brought a critical lens to this story yesterday. They just haven't challenged the scientific consensus. And honestly, I think the data we're seeing confirms that consensus. The Andes strain of the haontovirus seems to spread through bodily fluids and in some cases, quote, aerosolized saliva. It's very different from other respiratory infections like the flu, which can be transmitted through shared breath. Confirmed cases are going up because those people are on a very unusual cruise ship. It's small, carrying a maximum of 170 passengers and crewed by about 70, and they've been at sea for a while, following a tour of the Antarctic that was disrupted by the confirmed

haunt of virus infection. They've shared close quarters and would have had lots of opportunity for close contact, which can simply mean sitting near someone for a prolonged period of time while eating. Considering the virus's long incubation period, some of them were likely infected before they knew what was going on. Hontovirus is still a contagious disease, so it's not a surprise that cases are increasing, nor is it a surprise that they're going up slowly. We'll see what we learn in the coming weeks. Maybe something about this Andy strain is very different from previously studying ones, the fact will bear that out. Not saying that won't happen, it just seems unlikely based on the fact so far. Okay, that's it for your reader questions this week. So I'm going to send it back over

to Will for the rest of the pod. Thanks, Ari. All right, here is our now weekly Thursday feature, which we call The Road Not Taken, in which we discuss our decision making for the main topics for this week and some of the other stories that we considered covering, but ultimately chose not to or pushed to subsequent weeks. So this week, our decisions for the main topics to cover, were fairly non-controversial among our editorial staff. The Virginia redistricting decision was the clear story coming out of the weekend, and we knew we were due for an Iran update, while the spike in inflation pushed us to cover the new data today.

The only thing that came close to a judgment call was to hold our coverage of the Trump-Gy summit until after it occurred, which is a pretty standard practice for us. And that decision opened us up to discuss Haanta virus on Wednesday, which coincided with the return home of the Americans, from the infected Dutch cruise ship. Several readers did criticize us for what they thought was adding to the hysteria of hauntavirus

by choosing to give attention to the story at all. But the concern from other readers about the outbreak does seem to justify our decision and we're glad that we wrote about it. All right, and finally, here's our Have a Nice Day story. The Taylor's Checkerspot butterfly has lost 97% of its native Pacific Northwest to prairie habitat.

And without human intervention, it might have disappeared completely. The intervention is happening inside a prison greenhouse, where incarcerated women tend to be endangered species as trained butterfly technicians, tracking egg clusters, monitoring larvae, and logging data. The program has helped raise and release 80,000 caterpillars into restored prairie habitats since 2011. For Margaret Taggart, who was set for release from prison in 11 months, and is now considering pursuing environmental work. The work has meant something harder to quantify.

Quote, it gave me a belief in myself that I can learn and grow, Taggart said. Reasons to be cheerful has this story, and we'll drop the link to it in today's show notes. All right, that is it for today's edition, and that wraps up our week of normal Monday to Thursday editions. We will be back tomorrow with a Friday edition from Isaac, which we're really excited to share with all of you.

So stay tuned for that. And in the meantime, have a great rest of your day, night, wherever it is that you're listening, and we'll talk to you soon. Peace. Our executive editor and founder is me, Isaac Saul, and our executive producer is John Wall. Today's episode was edited and engineered by Dewey Thomas. Our editorial staff is led by managing editor Ari Weitzman

with senior editor Will Kayback and associate editors Audrey Moorhead, Lindsay Canuth, and Bailey Saul. Music for the podcast was produced by Diet 75. To learn more about Tangle and to some Find them for a membership, please visit our website at retangle.com.