The Federal Reserve has a new boss, and Wall Street is trying to figure out what he actually believes. Kevin Warsh, sworn in as Fed Chair on May 22, 2026, is days away from his first FOMC meeting, and the central question is deceptively simple: does he still think 2% inflation is the number that matters?
The inflation metric shuffle
The Fed has used 2% as its North Star since 2012. It’s the number that drives interest rate decisions, shapes forward guidance, and anchors the expectations of everyone from hedge fund managers to homebuyers.
Warsh appears open to changing how that target is measured. During his April 2026 confirmation hearing before the Senate, he emphasized the importance of trimmed-mean inflation measures over the traditional core PCE metric. Instead of stripping out food and energy prices (which is what core PCE does), trimmed-mean PCE removes the most extreme price changes on both ends and averages the rest.
Right now, those two numbers tell very different stories. Core PCE sits at roughly 3.3%, well above the Fed’s target. Trimmed-mean inflation, meanwhile, is hovering around 2.3%. If Warsh leans toward the trimmed-mean reading as his preferred gauge, it gives the Fed significantly more room to hold rates steady or even cut. If he sticks with core PCE, the math argues for keeping policy tight.
