Trimmed Mean Inflation Hits Multi-Year Lows as Fed Dissent Grows
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- Dallas Fed trimmed mean showed June's one-month annualized inflation rate at 1.4%, down 1.3 percentage points from May — its lowest level since November 2020 — while the 12-month measure fell to 2.2%, the lowest since July 2021.
- Cleveland Fed's 16% trimmed mean CPI registered 2.63% for June, the lowest reading since May 2021, using the consumer price index rather than the PCE benchmark the Dallas measure employs.
- Dallas Fed President Lorie Logan dissented from the FOMC's rate-hold decision in favor of a quarter-point hike, joined by Minneapolis's Neel Kashkari and Cleveland's Beth Hammack — three dissents against holding steady.
- Citigroup economist Andrew Hollenhorst said he expects markets to price out rate hikes in coming months and price in cuts if unemployment rises, noting that Warsh's preference for broad metrics makes trimmed-mean data especially relevant now.
- June PCE data showed the all-items index fell 0.1% on the month, largely on declining fuel costs, while the core measure excluding food and energy gained 0.1%; annual rates were 3.7% and 3.3% respectively.
- Logan cautioned that compositional shifts in the price-change mix may be artificially depressing the trimmed mean, and warned inflation is "trending toward the mid-2's" with risks to the upside — not back to the 2% target.
- Chairman Kevin Warsh acknowledged that "five-plus years of inflation above target cannot be cured in nine weeks," while markets reacted to the rate hold with a surge in long-end bond yields.
Why it matters: The trimmed mean data gives Warsh cover to argue underlying inflation is normalizing faster than headline figures suggest, and per Citigroup's Hollenhorst, that could pull rate-hike expectations out of markets. But with three regional Fed presidents openly dissenting for a hike and Logan herself warning the trimmed mean may be artificially low, the numbers could deepen the FOMC's split rather than resolve it.
