Trimmed mean places high weight on housing PCE, Skanda Amarnath argues

Trimmed mean places high weight on housing PCE, Skanda Amarnath argues
Trimmed mean inflation method questioned

Skanda Amarnath discusses methodological concerns with the trimmed mean approach to measuring inflation. According to Amarnath, the trimmed mean places a significant weight on housing Personal Consumption Expenditures (PCE), which are derived from only two closely related indices and tend to lag behind important economic dynamics.

Amarnath further notes that if the intention is to assess a broad set of prices in real time to gauge underlying inflation, relying on the trimmed mean may present challenges.

Amarnath previously argued that the U.S. economy can absorb significantly higher oil prices without falling into recession. In an earlier analysis, he highlighted the Federal Reserve’s focus on age-adjusted employment-to-population ratios as growth tracks changes in labor supply. These perspectives inform his scrutiny of the trimmed mean’s usefulness for real-time inflation assessment.

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