Kevin Warsh Wants Federal Reserve to Change How It Measures Inflation

Kevin Warsh, President Trump's pick to lead the Federal Reserve, told lawmakers during his confirmation hearing Tuesday that he wants to overhaul how the central bank measures inflation. The proposal has triggered debate among economists about the accuracy of current inflation data.

Warsh outlined his preferred method for tracking price increases, though he provided few details about specific changes he would make. The Federal Reserve currently uses several measures to track inflation, with a focus on the Personal Consumption Expenditures index.

Critics argue that Warsh's inflation critique ignores some basic economic facts. Senate members spent relatively little time probing his inflation data proposals, instead focusing more on questions about Federal Reserve independence.

The Fed's inflation measurements directly influence interest rate decisions. When inflation appears high, the central bank typically raises rates to cool the economy. When inflation seems low, rates often fall to encourage spending and investment.