Fed's Inflation Numbers Mask True Extent of Economic Pain

The Federal Reserve's inflation numbers for June show a slight decrease in the Personal Consumption Expenditures (PCE) index, but experts are warning that the Fed may not be doing enough to contain inflation.

The PCE index, which is the inflation measure favored by the Fed, showed a month-over-month change of 0.1% in June, down from the median projection of 0.2%. The year-over-year figure dropped from 4.1% to 3.7%, with food and energy prices contributing to the decline.

However, experts are cautioning that the Fed's use of chained inflation, which takes into account substitutions made by consumers in response to price changes, may be masking the true extent of inflation. The traditional version of the Consumer Price Index is 10.2 points higher than the chained version, a difference of 5.76%. This discrepancy raises questions about whether the Fed's measures are accurately capturing the impact of inflation on households and businesses.

New Federal Reserve Chair Kevin Warsh has stated his desire to make changes to the data used by the Fed, but he has not provided any details on what those changes will be or how they will be implemented. This lack of transparency is causing concern among economists and financial experts, who are warning that the Fed's actions may be driven more by a desire to please markets than by a genuine commitment to controlling inflation.