The Fed's Preferred Inflation Gauge Under Scrutiny

The new Fed Chair, Kevin Warsh, brings unconventional views on inflation measurement and has expressed a preference for trimmed measures, at a time when inflation has remained above target for five years.

In the current environment, the Dallas Trimmed PCE exhibits a downward bias following a succession of supply-side shocks since 2020 and was also slow to capture the 2021 inflation surge. A shift in the Fed's preferred inflation gauge could therefore raise credibility concerns.

Discover our views here.