Why the Fed Chair Nominee Likes a Leaner Inflation Measure

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Polo Rocha

Full Bio Polo Rocha has written about economics and banking for a decade.

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Published April 24, 2026

04:54 PM EDT

Kevin Warsh, U.S. President Donald Trump's nominee for Chair of the Federal Reserve, has some thoughts about how inflation is measured. Andrew Harnik / Getty Images

Key Takeaway

• Incoming Federal Reserve Chair Kevin Warsh supports using trimmed inflation measures to track price trends.
• Trimmed inflation measures exclude extreme price changes, offering a clearer view of underlying inflation, he argued.
• Lower inflation readings from trimmed measures could influence the Fed’s decisions on interest rate cuts.

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No measure of inflation is perfect, which is why incoming Federal Reserve Chair Kevin Warsh wants to try out a different approach.

That includes a rather ambitious undertaking—working with government statisticians on a survey of a billion prices in the United States. But some changes are more straightforward, including one that would move an existing inflation measure further up in the Fed’s inflation dashboards.

Warsh, at his Senate confirmation hearing on Tuesday, said he preferred “trimmed” inflation mean measures because they give Fed officials a clearer reading of price trends.

The Fed’s goal is to keep inflation at an annual rate of 2%—a target it hasn’t met since the post-pandemic price spike. But that goal is only as good as the various inflation measures the Fed uses, which is why analysts are keeping an open mind on Warsh’s approach.

Why This Matters

How the Fed measures inflation can influence interest rate decisions and borrowing costs. A shift toward trimmed metrics could affect expectations for rate cuts and market stability.

“His overall point is well taken that there is always room for improvement,” wrote Douglas Porter, chief economist at BMO.

Trimmed inflation means are nothing new and have long been on Fed officials’ data dashboards, but Warsh’s preference could make them more important. Much like box and whisker plots in math class, they remove the outliers on the high and low end to come up with a “trimmed” mean.

In one metric from the Dallas Fed, that meant trimming February’s 50.8% plunge in telephone equipment prices and the 37.5% drop in egg prices — along with the 124.5% jump in jewelry prices and the 384.6% spike in moving, storage and freight service prices.1

Removing the outliers meant that yearly inflation rose by 2.3% in February, relatively close to the Fed’s 2% target. The Fed’s main inflation gauge, meanwhile, suggests inflation rose by 3% in February.

A Cooler Reading, For Now

Fed officials have been worried that their progress in returning to 2% inflation has stalled, just as the Iran war adds yet another shock to prices. But judging by trimmed mean measures, the inflation picture is less worrying, Warsh told senators on Tuesday.

“They're not where they should be, but I think that the trend is quite favorable,” Warsh said.

But trimmed means aren’t perfect, BMO’s Porter wrote. The Fed’s main gauge “flagged the very real inflation problem in 2021 much earlier than the trimmed mean did,” he wrote.

Lower inflation readings, in turn, could make the Fed more likely to cut interest rates if the Iran energy shock proves temporary. That would put the Warsh-led Fed in line with President Donald Trump’s stated view that the central bank should cut interest rates, even if the Fed opts for less aggressive cuts than Trump might want.

The flip side is that trimmed means may not always suggest a more dovish approach, Bank of America Economist Aditya Bhave wrote. That raises the “risks of cherry picking” if the data flips and trimmed means start to show a more alarming inflation outlook, he wrote.

Even so, he said that looking at trimmed means is reasonable.

After all, the Fed’s main inflation gauge also makes “an arbitrary choice” since it omits food and energy prices, he wrote.

Fed officials do take into account trends in food and energy prices, a key part of consumers’ spending, when deciding on monetary policy. But those costs are also volatile and can fall just as quickly as they rise—egg prices, for example, are back to more normal levels after a recent spike.2

Related Education

[Personal Consumption Expenditures (PCE): What It Is and Measurement

](https://www.investopedia.com/terms/p/pce.asp) [What Is the Relationship Between Inflation and Interest Rates?

](https://www.investopedia.com/ask/answers/12/inflation-interest-rate-relationship.asp)

So Fed officials often look at “core” inflation indices, viewing the price of everything else as a gauge of underlying inflation trends.

Rather than stripping out food and energy, the trimmed means that Warsh prefers are “agnostic on what they exclude,” Bhave wrote. Beef prices can be part of a trimmed mean one month and be trimmed out the next.

The challenge for Warsh will be staying consistent once trimmed means show inflation is running hotter than the Fed’s current preferred measure suggests.

“To preserve Fed credibility and avoid optics of cherry picking, Warsh will need to stick with his preferred metrics even when they are outpacing the core,” Bhave wrote.

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1. Federal Reserve Bank of Dallas. “Trimmed Mean PCE inflation rate.”
2. Bureau of Labor Statistics via Federal Reserve Economic Data. "Average Price: Eggs, Grade A, Large (Cost per Dozen) in U.S. City Average."

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