Warsh has signaled he wants to change the Fed’s preferred inflation gauge.
The Fed has used Core PCE, which excludes food and energy, as its benchmark since 2000. Warsh favors Trimmed Mean PCE, which removes the most extreme price movements each month instead of excluding whole categories.
The practical difference: Trimmed Mean PCE currently reads 2.36%, well below the 3.20% reading on Core PCE. Depending on which measure the Fed follows, the case for rate cuts looks very different.
This is not a minor procedural change. The metric the Fed uses to gauge inflation directly determines when it judges the economy to be at target.
If Warsh moves the committee toward Trimmed Mean PCE, he is mathematically moving the Fed closer to a declared victory on inflation, which creates runway for rate cuts even as headline readings stay elevated.
You’d think with 400+ Ph.D. economists and 500+ researchers on the payroll, the Fed would run the most sophisticated macro forecasting operation on the planet, leaving Bloomberg and every major hedge fund in the dust. Not even close. When the data doesn’t cooperate, just change the data.
Same thing I saw in the Army when time or weather worked against higher leadership, and we would quietly move the goalposts rather than admit the standard couldn’t be met. Can you tell why I didn’t stick around for the full 20 years?
The markets are all making all time highs after a historic 14 day turnaround off the low. Semis are up 25% Transports are up 20%. Software is coming alive again and looks to have found a floor.
And Bitcoin is still trading at $74k..? 🤣
What even is the bull case at this point?
@alpha_pls The S&P did not open above its 50 day today, so technically it did trade through it intraday. The only instance I could find of price opening ABOVE both following a close beneath both averages on the previous day was Dec 3 2018
Has there ever been a time when crypto folks were this divided on what happens next? One half thinks we’re going to 75k while the other is screaming that we’re obviously about to rip to 150k
Bananas.
Good for business though.