---
title: "What Gives the Fed Confidence to Hold Steady? Growing Signals of Cooling US Inflation!"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/294553791.md"
description: "The Dallas Fed's trimmed-mean inflation rate annualized for June plummeted to 1.4%, the lowest since November 2020; the 12-month rolling data dropped to 2.2%, approaching the 2% target. However, core PCE year-over-year remained at 3.3%, significantly above the target. Rarely, three dissenting votes emerged within the Fed. Chair Waller stated that multiple indicators would be considered but emphasized that inflation issues cannot be resolved in the short term"
datetime: "2026-07-31T20:40:27.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/294553791.md)
  - [en](https://longbridge.com/en/news/294553791.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/294553791.md)
---

# What Gives the Fed Confidence to Hold Steady? Growing Signals of Cooling US Inflation!

New variables have emerged in the Fed's tug-of-war over its inflation target. The latest data shows that the "trimmed mean" indicator, which measures inflation trends, has fallen to a multi-year low, providing a new reference dimension for policy discussions.

Wall Street Insights mentioned that on July 30, the US PCE price index fell month-over-month for the first time in six years. **The Dallas Fed's trimmed-mean inflation rate, annualized for the single month, plunged to 1.4%, not only below the Federal Reserve's 2% policy target but also the lowest level since November 2020.**

**This data has sparked market attention, especially against the backdrop of Fed Chair Waller explicitly expressing his intention to re-examine the inflation measurement framework.** Meanwhile, rare dissent from three members emerged within the Federal Reserve.

Dallas Fed President Lorie Logan, Minneapolis Fed President Neel Kashkari, and Cleveland Fed President Beth Hammack all voted against the decision to keep interest rates unchanged, insisting that inflationary pressures remain too high and require immediate action.

## Trimmed Mean Indicator Hits Multi-Year Low

**The trimmed mean inflation indicator reflects the true trend of prices for most goods and services by excluding extreme values at both ends of the price change distribution.**

The Dallas Fed's version excludes the bottom 24% and top 31% of readings from the PCE price index to obtain a more representative median trend.

**June data showed that the Dallas Fed's trimmed-mean single-month annualized inflation rate was 1.4%, a sharp drop of 1.3 percentage points from May; the 12-month rolling data, which policymakers pay closer attention to, fell to 2.2%, down 0.2 percentage points from the previous month, marking the lowest level since July 2021.**

The Cleveland Fed's "16% Trimmed Mean CPI," based on the Consumer Price Index, includes components with price changes between the 8th and 92nd percentiles. The reading for this indicator in June was 2.63%, which, on an unrounded basis, is also the lowest level since May 2021.

Beyond the trimmed mean data, previously released overall PCE data from the US Department of Commerce showed that the overall index fell 0.1% month-over-month in June, mainly dragged down by a significant drop in fuel costs.

Core PCE, excluding food and energy, rose 0.1% month-over-month; year-over-year, overall PCE and core PCE rose by 3.7% and 3.3% respectively, both still significantly above the Federal Reserve's 2% target.

Citigroup economist Andrew Hollenhorst also pointed out:

> **The fact that underlying inflation is still falling toward the target, as seen across a broad range of indicators, is particularly important against the backdrop of Chair Waller stating that he will analyze inflationary pressures by observing multiple indicators.**

## Waller's Framework Reshaping and Market Expectations

The trimmed mean data has received extra attention partly due to Waller's recent remarks.

**He expressed his intention to assess inflationary pressures by examining a broader matrix of indicators rather than relying on a single measure.**

Andrew Hollenhorst noted that the trimmed mean data "should now also be closer to levels consistent with the target." He further stated:

> Given Chair Waller's hint that he will analyze inflationary pressures through a broad range of indicators, the fact that underlying inflation is still slowing toward the target has become more important. We expect that in the coming months, the market will gradually digest rate hike expectations under the influence of inflation data and begin to price in the possibility of rate cuts when the unemployment rate rises as we predict.

However, Waller himself sent rather cautious signals this week. He stated that although there are some positive signs on the production side, the Federal Reserve still has a lot of work to do:

> None of my FOMC colleagues harbor any illusions. We have turned a new page and understand that more than five years of high inflation cannot be resolved in nine weeks or by a single month of mild price declines.

## Internal Dissent Reflects Divergence in Inflation Judgments

Despite the decline in trimmed mean data, there are clear reservations within the Federal Reserve regarding its interpretation.

Logan, who has direct jurisdiction over this indicator, explicitly warned against over-interpreting it. She stated:

> Dallas Fed researchers found that changes in the combination of price increases and decreases have led the trimmed mean to currently exclude too many items with rising prices, **an effect that may cause the trimmed mean to be lower than the true inflation trend.**

Logan subsequently voted against maintaining interest rates at the FOMC meeting, advocating for a 25 basis point increase in the benchmark interest rate. She pointed out:

> Even considering productivity improvements and temporary supply shocks, inflation appears to be converging toward an intermediate level above 2%, rather than fully returning to 2%, with risks skewed to the upside.

Kashkari and Hammack hold positions similar to Logan's, both stating that inflation remains at uncomfortably high levels and that the Fed should act immediately rather than continue waiting.

The bond market also expressed doubts about the Fed's decision to pause rate hikes, with long-end yields rising significantly this week, reflecting investors' concerns about future growth and inflation prospects.

### Related Stocks

- [C.US](https://longbridge.com/en/quote/C.US.md)
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