Warsh Backs Trimmed-Mean Inflation Gauge as PPI Hits 6.5%
Updated
Updated · linkedin · Jun 11
Warsh Backs Trimmed-Mean Inflation Gauge as PPI Hits 6.5%
3 articles · Updated · linkedin · Jun 11
Summary
Kevin Warsh told his confirmation hearing he favors trimmed-mean measures for inflation, a shift that would guide the Fed toward indexes that exclude the biggest price jumps and drops.
That approach can produce much lower readings than headline data: May PPI ran at 6.5%, while recent Dallas Fed and Cleveland Fed trimmed-mean measures were 2.3% in April and 2.9% in May.
Standard Chartered analysts said trimmed PCE has historically done a worse job than core PCE at projecting future inflation, challenging Warsh's case that it better captures the underlying trend.
The debate matters because the Fed already prefers PCE over CPI, and a wider move toward trimmed measures could further shape how inflation is judged and how interest-rate policy is set.
With prices soaring, why is the Fed considering an inflation metric that shows lower numbers?
Is the Fed's push for a new inflation gauge a smart move or a risky gamble with its credibility?
The Trimmed-Mean Inflation Debate: Warsh’s Fed, Policy Risks, and the Credibility Challenge in 2026
Overview
As of June 2026, the Federal Reserve faces a pivotal moment in its inflation policy, with Chair Kevin Warsh and Governor Michelle Bowman advocating for the trimmed-mean inflation index as the main benchmark. This measure currently shows the lowest inflation rate, leading Warsh to argue that inflation is not an urgent problem. However, critics warn that switching to this new metric, especially after five years of inflation above the Fed’s 2% target, could be seen as 'moving the goal posts' and risk undermining the Fed’s credibility. The debate highlights deep divisions over how best to measure and respond to persistent inflation.