Inflation Readings: Are There Other Informative Cuts of the Data?

The June 10 Consumer Price Index (CPI) reading showed annual inflation reaching a 4.2% annual rate, a three-year high, with a rise in energy prices contributing to the surge. Stripping out volatile food and energy prices, CPI accelerated to a 2.9% annual pace. With prices of food and fuel driving higher upticks recently, the conversation around alternative ways to report inflation has re-emerged. In this discussion, ProSight speaks with Gene Ludwig—former U.S. Comptroller of the Currency and a prominent voice on economic measurement—about inflation, the limitations of traditional metrics like the Consumer Price Index (CPI), and evolving approaches to better inform monetary policy. Ludwig offers perspective on recent debates, including the idea of “trimmed” inflation and the importance of using multiple data lenses to understand the real cost pressures facing Americans. 

ProSight: There has been discussion lately, including from new Federal Reserve Chairman Kevin Warsh, about whether inflation measures are being misrepresented. Warsh has argued that indicators such as the core Personal Consumption Expenditures (PCE) index should exclude, or “trim,” more volatile components such as food and energy. What are your views on this approach? 

Ludwig: I have a great deal of respect for Kevin Warsh—I think he’s thoughtful and draws from both academic and practical experience. Inflation, as we measure it today, particularly through the CPI, is inherently imperfect. If we run the entire economy based on a single flawed metric, we can end up with distorted outcomes. I’m confident the effort to refine inflation measures is about improving decision-making. While I haven’t personally evaluated the “trimming” method over long historical periods, the idea of incorporating multiple views of inflation is sound. Policymakers make better decisions when they have better information.  

ProSight: Are these approaches to the data statistically sound? 

Ludwig: These approaches are grounded in reasonable statistical and economic thinking. Importantly, no one is suggesting this should be the only method—it’s about broadening the analytical toolkit, not replacing it entirely.  

ProSight: Why hasn’t this perspective—acknowledging flawed data and improving it—gained traction earlier among economists or policymakers? 

Ludwig: It’s a fair question. Some people may feel embarrassed they didn’t identify these issues sooner, and that can slow progress. But there are encouraging signs. Recent reporting suggests the Federal Reserve Bank of New York has conducted studies indicating that essential living costs have risen faster than the CPI over the past two decades. That aligns with what we’ve been saying in our work on the True Cost of Living at the Ludwig Institute for Shared Economic Prosperity (LISEP): the headline numbers don’t always capture lived experience accurately. 

ProSight: So, in some cases, the problem isn’t that inflation is overstated due to volatility in energy or food—it might be understated? 

Ludwig: Exactly. The issue cuts both ways. While volatile categories like oil can spike inflation figures, for many Americans—particularly those in the middle- and lower-income brackets—essential goods have been rising in cost faster than CPI suggests. That’s why we focus on the specific and essential goods and services, including transportation and childcare, that better reflect everyday expenses. For the majority of Americans, inflation has been higher than the official numbers indicate.  

ProSight: What’s the practical effect if policymakers adopt different ways of measuring and reporting inflation? 

Ludwig: The point isn’t to replace CPI entirely but to supplement it. Different measures—like trimmed inflation or indices focused on essential goods—can provide a more nuanced understanding. This helps the Federal Reserve better fulfill its dual mandate: price stability and employment. If we develop a more stable and accurate view of inflation, monetary policy itself may become less volatile and produce better outcomes across both objectives.