Kevin Warsh can’t reopen the Strait of Hormuz | CNN Business

The public is fed up with the high cost of living, and the Federal Reserve is once again under pressure to act. Kevin Warsh, the new Fed chairman, has vowed to get inflation back to 2%. Some investors suspect the Warsh-led Fed will show it’s serious about that pledge by raising rates as soon as Wednesday. And yet: As powerful as the Fed is, its inflation-fighting tools are limited when it comes to combating the supply-driven inflation America is facing now. The Fed can’t conjure a durable ceasefire in the war with Iran, reopen the Strait of Hormuz, nor disappear President Donald Trump’s high and volatile tariffs. “Rate hikes won’t keep the bombs from dropping,” said Benson Durham, a former Fed official and founder of DASM LLC, an independent research firm. The Fed mostly put out the post-Covid inflation fire by spiking interest rates starting in 2022. Those rate hikes were aimed at cooling overheated demand, giving supply a chance to catch up. First, it’s not as severe. Inflation is hovering at about 3.5%, above the 2% target but a far cry from the 9.1% inflation of mid-2022. Second, today’s economy is not overheating with gangbusters demand. Hiring is weak. Wage gr