Are prices rising fast? Apparently, it depends on who is measuring them and how they are doing so. The Wall Street Journal’s Nick Timiraos discusses newly appointed Fed Chairman Kevin Warsh’s views on inflation, noting that Warsh is focused on the Trimmed Mean inflation rate rather than the core-PCE rate that the Fed has relied on for years. Timiraos writes:
At his confirmation hearing in April, Fed Chairman Kevin Warsh urged the central bank to pay more attention to measures like the trimmed mean, turning what had been a technical debate among economists into a live question for policy.
The question is whether these alternative measures are better at filtering out the effects of tariffs, AI investment and geopolitical shocks to produce a more accurate (and, for now, benign) picture of where underlying inflation is headed. Or do they understate underlying pressure because those same effects aren’t actually one-offs but persistent forces shaping the economy?
Warsh has signaled he favors the first interpretation. “What I’m most interested in is what’s the underlying inflation rate, not what’s the one-time change in prices because of a change in geopolitics or a change in beef,” Warsh told lawmakers.
How different are the various inflation rates? Take a look at a sample of some of the more commonly known inflation measures produced by different parts of the federal government.
The range of measures in this sample is from a 2.35% annual increase in prices to a 3.78% annual increase. And there are even more measures of inflation produced by the government.
Action Line: “There are lies, damned lies, and statistics.” That phrase is often associated with Mark Twain, but he attributed it to British Prime Minister Benjamin Disraeli, who no doubt was familiar with the inevitable obfuscation that comes with government-produced data. How Fed Chairman Kevin Warsh views inflation could affect his decisions on interest rates, yields on government treasuries, and other bonds. Read more about Treasury yields in my piece here.
