Fresh concerns are emerging that the Trump administration’s dismissal of Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer may be part of a broader strategy to undermine the credibility of official inflation data, with potential implications for markets and Federal Reserve policy debates.
While early commentary, including a pointed note from J.P. Morgan, highlighted risks to monetary policy and financial stability from politicising federal statistics, a market analyst is now warning that the real endgame may be to manipulate or discredit the Consumer Price Index (CPI) itself.
At the centre of the concern is the $2.1 trillion market for Treasury Inflation-Protected Securities (TIPS), which relies heavily on trust in how CPI is calculated. If that trust erodes, investors may demand a higher risk premium for holding TIPS, potentially leading to a distorted drop in market-implied inflation expectations.
Analysts note that market-implied inflation breakevens—derived from the spread between nominal Treasuries and TIPS—have long been used as a neutral, data-driven input in monetary policy discussions. Undermining confidence in the CPI could allow the Trump administration to dismiss market-based inflation readings that contradict political messaging.
If investors begin to fear that CPI data is being tampered with or politically massaged, the TIPS market could price in that uncertainty, lowering the reliability of market-implied inflation expectations.
The prospect that inflation statistics could become a political tool has raised alarm in both policy and investor circles, with some warning that it could damage the long-term credibility of U.S. financial markets.
This article was written by Eamonn Sheridan at investinglive.com.