Economist: Powell's Favorite Unconventional Inflation Gauge "Unreliable," Hopes for Challenge

BlockBeats News, June 16th, Federal Reserve Chairman Powell once expressed a preference for adopting another inflation measure standard - the "trimmed mean PCE inflation," which excludes extreme values before calculating the weighted average.

Boston College economics professor Brian Bethune stated that currently, the trimmed mean PCE is not the most reliable indicator. In short, when the inflation shock behaves similarly to the period of 2009-2019 (i.e., before the 2020 COVID-19 crisis), this indicator works best because there was a better balance between positive and negative shocks at that time. However, when price shocks mainly come from positive factors such as supply disruptions, tariffs, surging oil prices, or significant special sports events (like the World Cup), this indicator will underestimate inflation.

"Therefore, it is hoped that someone can challenge him on this," Bethune said. But regardless of which indicator is referenced, U.S. inflation remains above the Fed's 2% target - has been so since the spring of 2021. (FX168)