LARRY KUDLOW: Can Kevin Warsh have his cake and eat it too?

The sun was shining on the Fed chairman, Kevin Warsh, today as he gave his first Congressional monetary report on a day when the consumer price index unexpectedly fell for the first time in six years.

And that takes a near-term Fed rate hike off the table.

As Mr. Warsh said, it’s too soon to declare "mission accomplished," but he vowed to defeat inflation and get monetary policy right during his appearance before the House Financial Services Committee.

As he put it: "The 63 months of inflation above target has been an unfair burden. It has been a tax on the American people and businesses.

We plan on getting rid of that tax if that means we need a regime change in policy and we need new consideration of practices, some of which have been working, some of which haven’t, that’s what we aim to do"

The new Fed chairman has been in office only two months, but energy, precious metals, and farm commodity prices have already started trending lower.

Mr. Warsh intends to be a reformer at the central bank, and has commissioned a number of high-level task forces that will report later in the year on "regime change," as he puts it.

Yet one thing he understands better than his predecessor is that inflation is a monetary policy issue caused by bad choices and a lack of resolve to restore price stability and presumably restore the 2 percent target.

Futures markets took at least one Fed rate hike off the table after the benign CPI report.

There’s still another rate hike priced in perhaps some time this autumn, but I doubt it.

When you look at the core numbers excluding food and energy, which is what many Fed officials are focused on, the monthly numbers are coming down steadily, and even the 12-month change is only 2.6 percent.

The topline number for all items was lower in May than in April, and in June it actually fell by four-tenths of one percent.