America’s annual inflation rate dropped to 3.5% in June, down from 4.2% in May — the first month-over-month price decline in six years. But newly appointed Federal Reserve Chair Kevin Warsh is urging caution against reading too much into a single month of good news.

“There might be some that look at this morning’s data and say, ‘Oh, mission accomplished,'” Warsh told the House Financial Services Committee. “That is not my view.”

The report landed better than economists expected — Dow Jones-polled forecasters had predicted a milder decline, putting the annual rate closer to 3.8%. Markets reacted quickly: Treasury yields fell, and traders sharply scaled back bets on a Fed rate hike this month, with the odds of a July increase dropping to just 17%, down from 42% two days earlier.

Behind the numbers is a bigger, messier picture. The ongoing conflict with Iran has pushed up oil, gasoline, and related costs earlier this year, complicating the inflation outlook heading into the second half of 2026. A pullback in crude prices helped June’s numbers look better, but several economists caution that renewed energy price pressure could reverse the trend in the months ahead.

Warsh, who took over the Fed in June, has also been reshaping how the central bank communicates — notably dropping the traditional practice of offering forward guidance on future rate moves, a shift some market watchers see as a sign the Fed wants more flexibility given how unpredictable conditions have become.

The bottom line for now: relief for consumers and borrowers, but the Fed isn’t ready to declare victory.