Federal Reserve Chairman Kevin Warsh has said that inflation is a "choice." The same could also be true of how inflation is measured. While the central bank has its own favorite metric courtesy of the Commerce Department, the public data base is rife with other gauges of how price pressures are best viewed. It's likely that many of them will get a serious look as the Warsh Fed plots what he called on Wednesday a "new course" for how it operates and specifically what will be the data triggers for the ways it implements monetary policy. "My hope, my aspiration, is that nine-12 months from now we're going to be using new technologies to understand what's happening in the real economy in a contemporaneous, real-time way that positions us as central bankers to make better decisions," he said during a discussion at the European Central Bank Forum on Monetary Policy in Sintra, Portugal. Warsh has formulated five task forces to look at an array of Fed functions. One will be data-focused while another will take a look at how officials measure, and react to, inflation. The review is sure to be about more than the age-old battle between headline inflation and core inflation, the latter excluding the day-to-day necessities of gas and groceries because of how volatile those prices can be. Instead, the Fed can use the process as a way to bring in other data points that paint a more complete picture of the cost-of-living challenges consumers face from inflation, which has been running hot for five years. These include measures from other central bank offices such as the Dallas Fed and its focus on "trimmed mean" inflation that includes outliers. Or the Atlanta Fed's "sticky" and flexible" inflation that distinguishes between prices that tend to move up and down a lot and those that are steadier. There are also widely followed surveys from the University of Michigan and the New York Fed , as well as private sector measures such as the "Truflation" gauge that employs "cutting-edge technology to deliver the world's only verifiable daily inflation indexes." Perhaps unsurprisingly, these measures can and do present very different pictures of inflation, with some reinforcing the view that prices are still too high and others saying the Fed might be closer to its 2% goal than traditional measures indicate. "A good read on where inflation is headed is critical to whether the Fed needs to move rates," Claudia Sahm, chief economist for New Century Advisors, wrote in a Substack post Tuesday. "But trend is not destiny even a 2% trend is no guarantee of price stability, since actual inflation can diverge from trend as it does now." A basic view of the mainstream indicators shows inflation is well above the Fed's 2% target. The consumer price index a broad amalgam of what consumers pay for goods and services showed headline inflation running at a 4.2% annual pace in May, with core inflation at 2.9%. At the same time, the personal...
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