As Warsh’s Fed faces pressure to act on inflation, these indicators show it’s at its lowest in years
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- Dallas Fed's trimmed-mean measure showed a one-month annualized rate of 1.4% in June — down 1.3 percentage points from May and the lowest since November 2020 — with its 12-month rate dipping to 2.2%, a level not seen 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 as its benchmark.
- Dallas Fed President Lorie Logan dissented from the FOMC's decision to hold rates steady, preferring a quarter-point hike and arguing inflation is "trending toward the mid-2's, not all the way to 2 percent."
- Fed regional presidents Neel Kashkari and Beth Hammack joined Logan in dissenting for a rate increase, with Logan separately cautioning that compositional factors may be making the trimmed mean artificially low by "drop[ping] too many increases right now."
- Citigroup economist Andrew Hollenhorst said he expects markets to price out rate hikes in coming months on inflation data and price in cuts if the unemployment rate rises as projected.
- June PCE data showed the all-items index falling 0.1% on a sharp drop in fuel costs while the core index rose 0.1%; annual rates were 3.7% and 3.3% respectively.
- Chairman Kevin Warsh said the Fed has "begun a new chapter" but that "five-plus years of inflation above target cannot be cured in nine weeks — or by a single month of modest price decreases."
Why it matters: Three Fed regional presidents broke ranks to push for an immediate rate hike even as the Dallas Fed's own trimmed-mean gauge showed one-month inflation at 1.4% — its lowest since November 2020 — exposing a widening gap between data-driven doves and hawkish FOMC voters that could override rate-cut expectations Citigroup's economist says the data warrants.
