Bloomberg Surveillance · Wednesday, September 9, 2026
Jay Hatfield, CEO of Infrastructure Capital Management, contends that the Federal Reserve should prioritize the Consumer Price Index (CPI) over the Personal Consumption Expenditures (PCE) price index for policy decisions. He criticizes PCE for being largely imputed ('made up') and poorly designed, suggesting that adjustments to its flawed components would place it closer to CPI. Hatfield believes that current CPI data, even with rounding considerations, indicates declining inflation, making a rate hike by the Fed inappropriate.
“Well, we think that the Fed should use real consumption and real prices instead of the PC is really not meant as a price index. It's meant to adjust for the GDP. So it's 30 percent imputed, which is a fancy way of saying made up. And the methodology is horrendous.”
“So the in fact, even the BEA understands that. And they're going to do a revision of their two worst components, which are software and the software component, which is 21%, and the other component, which is total 0.8. So if they had adjusted both of those, then they would now be at 2.5, so just on top of CPI.”
“And just a quick point about CPI. We're actually pretty bowled up about CPI because of rounding. You should tell your programmers don't round the numbers. So the two rounding benefits are we're rolling off 0.31, and the year-over-year number is 2.47. So as long as CPI for the month is less than 0.28, we're going to roll down to 2.4 year-over-year.”
“And even this Fed. Would not raise rates when we've rolled down 0.5 on CPI. Again, the real should be the real index. We went from 2.9 to 2.4 year over year in four months. The four month annualized number is only going to be 1.8. And if you corrected PCE for those two components that are ridiculous, portfolio management and software, you would also get a 1.8% number.”