As Warsh‘s Fed faces pressure to act on inflation, these indicators show it’s at its lowest in years

Pricing data from June indicated that outside of some select items where costs continue to grow, inflation is trending back towards the Federal Reserve's inflation goal.

So-called trimmed mean measures, which exclude outliers in both price increases and decreases, showed inflation at its lowest since the early part of the decade.

The Dallas Fed's measure, in fact, puts the one-month annualized rate for June at just 1.4%, down a whopping 1.3 percentage points from May and at its lowest level since November 2020.

Further, the 12-month rate, which Fed policymakers watch more closely, dipped to 2.2%, down 0.2 percentage point from a month ago to a bottom not seen since July 2021.

While Fed officials are quick to stress that they don't focus on one month of any data point, the trend in the trimmed mean could get some attention, particularly in light of Chairman Kevin Warsh's intention to reexamine how the central bank views inflation and what data points it employs.

Trimmed mean data “should also now fall closer to target-consistent rates,” Citigroup economist Andrew Hollenhorst said in a note.

“The fact that underlying inflation is still slowing toward target – as indicated by a broad set of indicators – is now even more relevant given Chair Warsh's suggestion that he would analyze inflationary pressure by looking across a broad range of metrics,” he added. “We expect markets to price-out rate hikes in coming months on inflation data, and price-in cuts if the unemployment rate rises as we project.”