A new Fed chair brings new ideas on inflation

Trimmed Mean PCE suggests inflation close to Fed’s target

Percent change vs. year ago

Source: Federal Reserve Bank of Dallas, Bloomberg, as of May 31, 2026. Core PCE = Core Personal Consumption Expenditures price index.

The new Chair of the Federal Reserve, Kevin Warsh, is exploring reform at the central bank. His agenda includes examining “the quality, freshness, and accuracy” of economic data, and “the underlying drivers and measurements of inflation…”

For decades, previous Fed leaders touted the government’s Core PCE measure as their preferred measure of inflation. Warsh has described this measure as a “scientific wild guess,” criticizing the permanent omission of the food and energy sectors and a lack of actual consumer-based price discovery. He has spoken favorably of “trimmed mean” measures of inflation, which filter out extreme high and low readings dynamically, rather than always excluding food and energy.

The chart highlights trends in the Core PCE and the alternate Dallas Fed Trimmed Mean PCE. The traditional measure is well above the Fed’s 2% target and on the rise. The trimmed mean reading has been coming down and is close to the Fed’s inflation target. The primary inflation measure the Fed settles on could greatly influence monetary policy decisions in the years ahead.

What we’re watching this week:

Wednesday: The June ISM Manufacturing survey is released—a timely measure of the state of the industrial economy. Also, minutes from the FOMC’s mid-June meeting will be available.

Thursday: The June employment report comes out. Job growth has been strong in the prior three months. Consensus estimates look for a slower hiring pace in June.