The Federal Reserve has a measurement problem, and at least one of its top officials is saying the quiet part out loud.
Mary C. Daly, President and CEO of the Federal Reserve Bank of San Francisco, is pushing for improved monitoring of inflation and labor market data. The catch: she wants better inputs without changing the standards those inputs are measured against. The Fed’s 2% inflation target and dual mandate stay exactly where they are.
The data quality dilemma
Fed Chair Kevin Warsh put a finer point on this issue on July 1, calling for improved real-time economic data to address what he described as “mismeasurement problems.” Daly’s comments dovetail with that perspective, suggesting a growing consensus within the Fed’s leadership that the toolkit needs modernizing.
The numbers tell the story of why this matters right now. PCE inflation, the Fed’s preferred gauge, is running around 2.8-2.9%. CPI sits near 2.7%. Both remain stubbornly above the 2% target, but the gap is narrow enough that data precision becomes critical. A few tenths of a percentage point in either direction could mean the difference between holding rates steady and making a move.
