> ## Content Index > Fetch the complete content index at: https://the-long-horizon.ghost.io/llms.txt > Use this file to discover other available public pages before exploring further. # Inflation is 3.7%. And also 2.3%. - URL: https://the-long-horizon.ghost.io/inflation-is-3-7-and-also-2-3/ - Published: 2026-09-01T21:00:29.000Z - Updated: 2026-09-01T21:00:35.000Z - Description: Both are official July readings. The higher one is what your indexed holdings get paid on. - Author: Jonathan Morgan Inflation Is 3.7%. And Also 2.3%. ## **The Horizon** Thirty-one percent. That is the extra purchasing power twenty years delivers to a builder whose indexed holdings pay off one inflation measure while his own costs track another. Both measures are official, both are published by the government, and both describe July 2026\. One reads 3.7% and the other reads 2.3%. The gap between them appeared in a Dallas Fed release last Wednesday that almost nobody covered. ## **The Event** The Federal Reserve Bank of Dallas published its trimmed mean PCE reading for July on August 26\. Over twelve months the trimmed mean ran 2.3%. The Bureau of Economic Analysis put headline PCE at 3.7% across the same twelve months and core PCE at 3.3%. All three figures describe one month. The trimmed mean discards the categories with the largest price moves in both directions and averages what is left. It is an estimate of how fast prices are rising through the broad middle of the basket. Its shorter windows agree with the annual reading. The six-month trimmed mean is also 2.3%, and the one-month annualized figure came in at 2.2%, up from 1.5% in June. Core PCE removes food and energy by category. The trimmed mean removes outliers by size, which is how the two measures end up a full point apart. 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Warsh made any tightening conditional on confidence that the underlying trend is heading to target, and the trimmed mean is the most common technical definition of underlying. It has now printed 2.3% for two consecutive twelve-month windows. Markets are pricing a September increase at roughly 62% regardless. Indexed instruments do not pay off the trimmed mean, and this is where the gap reaches a balance sheet. TIPS principal, the Series I bond rate and the annual Social Security adjustment are each tied to an all-items measure, meaning the higher of the two. A holder of indexed paper is therefore compensated at the headline rate while the broad price system runs a point beneath it. That spread is purchasing power, and it accrues without any decision on his part. The arithmetic behind thirty-one percent is 3.7% compounding against 2.3% for twenty years. It assumes both rates persist and that a household's own basket tracks the middle rather than the extremes, and neither assumption is safe. The second assumption is the one a builder can actually inspect. A household heavy in fuel, utilities and air travel lives nearer the headline, and one light in those categories lives nearer the trimmed mean. Personal inflation is a consumption question and a portfolio question at the same time. The energy line that inflates the index also inflates the household buying a lot of it. The saving rate gives the gap a second edge. Households set aside 3.0% of disposable income in July, which leaves thin cover when the categories doing the moving are the unavoidable ones. For a business owner the breadth question lands on inputs rather than groceries. A few line items moving is a different problem from a general repricing, and it admits a narrower response. ## **The Watch** On Monday the United States struck Iranian rocket launchers positioned to mine the Strait of Hormuz. Crude rose on it, with West Texas Intermediate up close to 4% around $86 and Brent above $88. That is the mechanism most likely to widen this gap rather than close it. Energy is the outlier a trimmed mean discards and a headline keeps. Three dates test it. The employment report arrives Friday, August CPI follows on September 11, and the rate decision lands in the middle of the month. The next trimmed mean print comes with August PCE at the end of September. Whether the middle of the basket holds near 2.3% while the headline climbs is the number that settles which inflation a builder is actually living in.