Kevin Warsh backs trimmed mean inflation measure over core PCE
Updated
Updated · Barron's · May 11
Kevin Warsh backs trimmed mean inflation measure over core PCE
10 articles · Updated · Barron's · May 11
In Senate testimony, Warsh said March inflation was 2.4% on the Dallas Fed gauge versus 3.2% on the Fed’s preferred core PCE measure.
The lower reading could support interest-rate cuts, but economists warn trimmed mean can miss broad tariff-driven or persistent price pressures, as it did early in the 2021 inflation surge.
Any shift would need backing from the Fed’s rate-setting committee, and adopting a softer gauge as Warsh nears the chair could draw criticism that policymakers are moving the goalposts.
Could a new inflation gauge signal earlier Fed rate cuts, even as other data shows persistent price pressures?
As the Fed debates new metrics, which inflation number best reflects the true cost of living for American households?
Inflation Metrics in the Spotlight: Kevin Warsh, Trimmed Mean PCE, and the Fed’s Credibility Challenge
Overview
As Kevin Warsh prepares to become the new Federal Reserve Chair in May 2026, he inherits a central bank facing persistent inflation and policy uncertainty. With Jerome Powell's confirmation chances fading after a dropped DOJ inquiry, Warsh steps in as inflation remains above target and the Fed is in 'policy limbo.' If inflation reaccelerates, Warsh may be forced to raise interest rates, even if this goes against the administration's preferences. His leadership will be tested by the need to balance inflation control with political pressures, making his early decisions crucial for the Fed's credibility and the economy's direction.