Macro investor and the founder and CEO of Azuria Capital LLC, Otavio Costa, is slamming the Federal Reserve's latest inflation narrative, accusing the central bank of using curated data to justify premature interest rate cuts while actual living costs continue to soar.
‘Useless’ Metric
The controversy centers on the St. Louis Fed’s recent promotion of the Trimmed-Mean PCE inflation rate—a metric closely associated with former Fed Governor Kevin Warsh. Data released for March 2026 showed this measure ticking up only slightly to 2.36%.
However, critics argue this alternative measure of core inflation intentionally masks the reality of surging prices by stripping out extreme price fluctuations from the data.
“The St. Louis Fed now posting Kevin Warsh's useless inflation metric,” Costa stated recently on social media. “That's how far these guys have to go to justify cutting rates while inflation is picking back up.”
Costa highlighted a stark market divergence to prove his point: while the trimmed-mean metric paints a picture of stabilizing prices, the broader commodities sector is experiencing a massive upward spike.
By actively ignoring volatile categories—which invariably affect essential consumer goods—critics argue the metric fails to reflect the true economic pressures facing everyday households.
The End Of Independence
For Costa, this reliance on heavily modified data signals a much deeper structural issue: the complete erosion of the central bank’s autonomy.
“The Powell saga is a distraction. The Fed's independence has been gone for a while,” Costa wrote in a Substack post to investors. He argues the central bank is currently trapped by unsustainable national debt service levels, leaving officials with an impossible mathematical dilemma.
“You either crush the system with high rates, or you tolerate inflation and force rates lower. This isn't a debate. It's math,” he warned.
Ignoring The Reality Of Rising Costs
The Trimmed-Mean PCE is calculated by discarding the most extreme individual price changes at both ends of the spectrum each month.
While Fed officials claim it outperforms conventional measures by cutting through the noise, critics argue that in the current economic climate, ignoring these extremes means ignoring the lived reality of the consumer.
With long-term inflation expectations quietly jumping to two-year highs, market observers are warning that the Fed's reliance on what Costa calls a “useless” metric may ultimately damage the institution’s remaining credibility.
How Have Markets Performed In 2026?
The S&P 500 index has advanced 5.42% year-to-date. Similarly, the Nasdaq Composite index was up 8.09%, and the Dow Jones gained 2.31% YTD.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq 100 indices, respectively, closed higher on Friday. The SPY was up 0.28% at $720.65, while the QQQ advanced 0.96% to $674.15.
Meanwhile, Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), fell 0.33% to close at $495.02 on Friday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock
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