Kevin Warsh, President Donald Trump’s nominee for Federal Reserve chair, told lawmakers that he would like the central bank to change its strategy for measuring inflation.
But Bank of America economist Aditya Bhave warned Wednesday that such a reconfiguration — part of a broader “regime change” that Warsh has promised for the central bank — might not pan out as he hopes.
The Fed has long favored the core price index for personal consumption expenditures, known in short as the core PCE, because it excludes volatile food and energy prices.
But Warsh wants to go a step further, by rooting out extreme price shocks when calculating overall inflation.
“What I’m most interested in is: What’s the underlying inflation rate? Not: What’s the one-time change in prices because of a change in geopolitics or change in beef?,” Warsh said at his Senate hearing Tuesday.
