Lorie Logan, president of the Dallas Federal Reserve, said the Dallas Fed’s trimmed-mean PCE inflation measure of 2.3% [1] should not be given excessive weight.
This caution comes as Federal Reserve officials attempt to reconcile conflicting data points to determine when interest rate cuts may be appropriate. Because different regional banks use different models to track price stability, a single low reading can create a misleading sense of progress toward inflation targets.
Logan spoke May 28, 2024, regarding the utility of the trimmed-mean index. "We shouldn't put too much weight on the Dallas Fed's trimmed‑mean PCE inflation measure," Logan said [2].
Logan said that the 2.3% [1] figure is less representative of the broader economy when compared to other internal metrics. She pointed to the Cleveland Fed’s median PCE inflation rate, which stood at 2.8% [3] over the past year. Additionally, the New York Fed’s multivariate core-trend model showed a level above 3% [3] this year.
These discrepancies highlight the volatility in how inflation is measured across the Federal Reserve System. While the Dallas measure suggests a cooling trend, the New York and Cleveland models indicate more persistent underlying price pressures, a gap that could influence future monetary policy decisions.
Other officials hold different views on the data. Kevin Warsh has described the trimmed-mean measure as his favorite inflation gauge, suggesting it is a metric that should be closely watched [4].
“"We shouldn't put too much weight on the Dallas Fed's trimmed‑mean PCE inflation measure."”
The disagreement between Lorie Logan and Kevin Warsh over the validity of the trimmed-mean PCE index illustrates a lack of consensus within the Federal Reserve on how to interpret inflation data. By emphasizing the higher readings from the New York and Cleveland Feds, Logan is signaling that the central bank may need to remain cautious and keep interest rates higher for longer to ensure inflation is truly defeated.
