Trimmed Mean Indicators Signal Slowing Inflation Rates

Recent inflation data suggests that prices are trending back towards the Federal Reserve's target rate of 2%. According to alternative measures, such as the trimmed mean indicators used by the Dallas Fed and Cleveland Fed, inflation has hit its lowest point since the early part of the decade.

The Dallas Fed's trimmed mean measure put the one-month annualized rate for June at just 1.4%, a drop of 1.3 percentage points from May and the lowest reading since November 2020. The 12-month rate dipped to 2.2%, down 0.2 percentage points from the prior month and the lowest since July 2021.

Citigroup economist Andrew Hollenhorst noted that trimmed mean data should also fall closer to target-consistent rates, given underlying inflation's continued slowdown. He expects markets to price-out rate hikes in coming months on inflation data, and price-in cuts if the unemployment rate rises as projected.