The Government's Inflation Number Is Shrinking

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Small Business Strategy

A guy owns an auto repair shop in Chadbourn, North Carolina, and he is waiting to find out if interest rates on a new work truck loan are finally going to drop. On September 30th, the news will start reporting that inflation went down. Neither he nor his customers will be paying less for anything. But that is what the headlines will say. That is what is coming this month, and it is worth understanding exactly why before you read that headline and assume it means what it sounds like it means.

The Number Is Changing. Your Prices Are Not.

Every month, the government tracks how fast prices are rising using a measure called the Personal Consumption Expenditures index, or PCE. It is the number The Federal Reserve trusts most when deciding whether to raise or lower interest rates. On September 30, the agency that calculates it, the Bureau of Economic Analysis, is changing the formula for three specific things: legal fees, investment advice fees, and computer software (Mataloni, 2026). Here is the government’s own explanation, and it deserves a hard look rather than a pass. The government says the data used to track legal fees has had a real problem since 2023, and that it stopped publishing reliable numbers for it (Mataloni, 2026). Fair enough, if that is true. But here is the question worth asking directly: if this problem has genuinely existed since 2023, why did the agency wait until June 2026, nearly three years later, and three weeks after the largest public pressure campaign against The Federal Reserve since the institution’s founding was already underway, to announce the fix? Nobody has offered a good answer to that timing yet.

It’s Not Just This Month’s Number

Here’s the part that makes this bigger than one monthly report. This change is part of something the government does every single year, an annual update where it goes back and revises the numbers using newer information. This year, that update covers a full five years of data, all the way back to 2021. So it is not just September’s inflation reading that changes. Because the same math that measures monthly inflation also feeds into how the government calculates GDP, the big number that tells us how fast the whole economy is growing, GDP figures going back five years get quietly rewritten too (Mataloni, 2026). Nothing about how fast the economy actually grew changes. The measuring stick gets adjusted, after the fact, across half a decade of history.

This Is Not a Normal Moment to Be Making This Change

In late July, The Federal Reserve voted 9 to 3 to leave interest rates alone (Irwin, 2026). Three of its own officials wanted to raise rates because inflation has stayed too high for too long. Then, on September 4, President Trump posted this on Truth Social: “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT… The Fed Board, with its great new leader, must get smart, BE PATRIOTS for a change” (Mangan, 2026). He is talking about halting trade with dozens of countries, over $1.2 trillion worth of it, specifically to force an interest rate cut, and he repeated the threat in the Oval Office that same day (Yahoo Finance / 24/7 Wall St., 2026).

This did not start in September. Trump spent months publicly threatening to fire the previous Fed chair, Jerome Powell, and the Justice Department opened an actual criminal investigation into Powell over a building renovation project. A federal judge, James Boasberg, looked at that investigation and ruled, on the record, that “the Government has offered no evidence whatsoever that Powell committed any crime other than displeasing the President,” and found the investigation’s real purpose was to pressure Powell into resigning (Georgia Public Broadcasting, 2026). That is not a political opinion. That is a federal judge’s written ruling. Gary Richardson, who served as the Federal Reserve’s own official historian from 2012 to 2016, has said of this campaign: it is “an order of magnitude more than has ever happened” (Boston Globe, 2026). The standard historical comparison people reach for is President Nixon’s pressure on Fed Chair Arthur Burns in 1971 and 1972, but that campaign happened behind closed doors and only became public decades later through leaked tapes and diaries. What is happening now is playing out in public, in real time, backed by an actual federal criminal investigation, a federal judge’s ruling, and repeated threats from Donald Trump to destroy global trade if he does not get his way.

There is also a direct financial angle worth knowing, and it is bigger than it first looks. Back in the fall of 2025, disclosures showed Trump had bought more than $337 million in bonds, including municipal bonds, in just about five weeks (Bose, 2025). That was already a lot. It is also old news. His full 2025 disclosure, filed in June 2026, shows he made more than 14,000 stock trades that year alone, independently valued at up to 1.06 billion dollars by Bloomberg and up to 1.4 billion dollars by the Financial Times. He kept trading heavily into 2026, filing another 3,555 trades worth up to half a billion dollars in just the first three months of the year (Warren & Garcia, 2026). Bonds have an inverse relationship with interest rates: when rates fall, bondholders, including Trump, see capital gains (Himmelsbach, 2026). We have a president who personally profits when the supposedly independent institution he is publicly and repeatedly threatening finally does what he is demanding, and the scale of his trading has only grown since anyone last tried to put a full number on it.

A formula change that happens to make inflation look smaller is arriving in the middle of all of that. One economist who used to work at The Federal Reserve pointed out that this timing is worth noticing. He also admitted nobody knows exactly how big the effect will be yet. His exact words: it’s “a bit of a black box” (Schwab, 2026).

How Much Smaller Could the Number Get

Estimates vary, which is itself worth knowing, since it means even the experts aren’t fully sure. Some economists expect the reading to drop by as much as 0.1 to 0.3 percentage points (Schwab, 2026). An independent research firm that ran its own numbers on all three changes landed on a smaller estimate, closer to 0.1 (Underlying Inflation, 2026). Either way, we’re talking about a change of a tenth or two of a percentage point, on a number that’s currently sitting well above where The Federal Reserve wants it.

What This Actually Means for Your Business

If the number looks smaller at the end of the month, it gives The Federal Reserve an easier case to hold rates steady or even start cutting, instead of raising them like three of its own officials wanted, and it hands the president a talking point in a fight he has already said he is willing to blow up global trade over, and a fight he stands to personally profit from. That matters for your loan, your line of credit, your next piece of equipment. But here’s the important part: if that happens, it’s not because your own costs went down. It’s because the ruler used to measure inflation got adjusted, in the middle of what the Fed’s own former official historian calls the most severe pressure campaign against Federal Reserve independence the institution has ever faced. Don’t make a financing decision based on a headline that says “inflation fell.” Look at what you’re actually paying, and treat the government’s number as one input, not the whole picture.

The Bottom Line

A number most people will never think twice about is about to shift. The government says part of that shift is a real, documented fix. That claim deserves scrutiny, not automatic acceptance, given how long the problem supposedly went unaddressed and exactly when the fix finally arrived. What is not in question is the rest of it: a president who has threatened to fire a Fed chair, whose Justice Department opened a criminal investigation a federal judge called baseless and coercive, who is now threatening to halt global trade unless the Fed does what he wants, and who holds hundreds of millions of dollars in bonds that gain value if he gets his way. None of that is normal, and none of it should be written about as if it were. The businesses that come out ahead here aren’t the ones reacting to headlines. They’re the ones who know the difference between a number changing and a real cost changing, and who make their financing decisions based on the second thing, not the first.

Please note: The observations and insights in this post are general in nature. The Muninn Group shares general analysis and observations in this Insights section. Specific strategic recommendations for your business require a direct engagement where your particular situation, market, competitive position, and financial reality can be assessed properly. Your first consultation is always free. The Muninn Group will not hand you a deck full of buzzwords.

Works Cited

Mataloni, L. (2026, June 24). Preview of the 2026 annual update of the National Economic Accounts. Survey of Current Business, U.S. Bureau of Economic Analysis. https://apps.bea.gov/scb/issues/2026/06-june/0626-nea-preview.htm

Schwab, K. (2026, August 20). The Fed’s preferred measure of inflation is changing. Marketplace. https://www.marketplace.org/story/2026/08/20/will-changes-to-pce-methodology-affect-fed-rate-decision

Underlying Inflation. (2026, June 29). Impact of the BEA methodological changes on PCE inflation. https://underlyinginflation.com/impact-of-the-bea-methodological-changes-on-pce/

Irwin, N. (2026, July 29). Fed leaves rates steady, with internal dissent. Axios. https://www.axios.com/2026/07/29/fed-warsh-rates-inflation

Mangan, D. (2026, September 4). Trump says he will cease trading with top partners unless Fed lowers rates. CNBC. https://www.cnbc.com/2026/09/04/trump-fed-rates-jobs-trade.html

Yahoo Finance / 24/7 Wall St. (2026, September 4). Trump issues ultimatum to Fed: cut rates or face trade war with the world. https://finance.yahoo.com/economy/policy/articles/trump-issues-ultimatum-fed-cut-165521532.html

Georgia Public Broadcasting. (2026, April 17). Once again, Trump threatens to fire Fed Chair Jerome Powell. https://www.gpb.org/news/2026/04/16/once-again-trump-threatens-fire-fed-chair-jerome-powell

Boston Globe. (2026, June 12). Trump has run roughshod over Washington. This federal agency has stymied him, so far. https://www.bostonglobe.com/2026/06/12/nation/federal-reserve-jerome-powell/

Himmelsbach, V. (2026, May 1). Trump has quietly bought up to $337 million in bonds, and his Fed pick Kevin Warsh could send their value soaring. Yahoo Finance / Moneywise. https://finance.yahoo.com/economy/policy/articles/trump-quietly-bought-337-million-110500368.html

Bose, N. (2025, November 15). Trump buys at least $82 million in bonds since late August, disclosures show. Reuters. https://finance.yahoo.com/news/trump-buys-least-82-million-222505118.html

Warren, E., & Garcia, R. (2026, August 12). Letter to President Trump re: stock trades. United States Senate. https://www.warren.senate.gov/wp-content/uploads/2026/08/2026.8.12-Letter-to-Trump-re-Stock-Trades-final.pdf

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Philip White is the Founder and Principal Consultant of The Muninn Group, North Carolina’s premier strategic consulting firm. He is an Economist, Political Strategist, Geopolitical Risk Analyst, and accomplished Public Speaker based in Wilmington, NC. Contact: havi@themuninngroup.com | 910-632-0431 | themuninngroup.com

Small Business Strategy

A general contractor in Chadbourn, North Carolina, weighing whether to lock in financing for a work truck this month has no reason to think about how the Bureau of Economic Analysis calculates legal services deflators. On September 30, 2026, he will nonetheless feel its downstream effects. On that date, the Bureau of Economic Analysis will implement a revised methodology for three components of the Personal Consumption Expenditures index, or PCE, The Federal Reserve’s preferred inflation gauge, applied retroactively to data extending back to the first quarter of 2021. The revision rests on a genuine, documented data problem. It also lands three weeks after the sitting president publicly threatened to halt trade with every deficit-running trading partner unless The Federal Reserve cut interest rates. Both facts are verifiable and necessary to hold together; treating either one as the whole story understates what is actually happening.

I. The Mechanics of the Revision

The BEA is revising deflation methodology for three PCE components: portfolio management and investment advice services, legal services, and computer software and accessories. The legal services revision addresses a genuine data integrity problem rather than a discretionary judgment call: the underlying Consumer Price Index series for legal services has been effectively unpublished since September 2024, with the BEA subsequently relying on unpublished BLS estimates that fail to meet the agency’s own publication quality standards and have exhibited erratic movements uncorroborated by other source data. The computer software revision responds to a documented measurement gap; AI driven demand has pushed software pricing in directions the existing CPI based deflator was not constructed to capture (Schwab, 2026). BEA’s own technical preview confirms these as the two substantive deflator changes, alongside a parallel revision to the portfolio management deflator that replaces PPI-based deflation with a BLS employment-based quantity extrapolator (Mataloni, 2026).

II. Transmission to GDP and the Five-Year Revision Horizon

These deflator revisions do not remain confined to the monthly PCE price index. Personal consumption expenditures constitute the largest single component of GDP, and BEA’s real GDP estimates are derived by deflating nominal spending using these same price indices. Consequently, the September 30 release revises not only the monthly inflation reading but GDP, GDP by industry, and gross domestic income for the entire open revision period, the first quarter of 2021 through the first quarter of 2026 (Mataloni, 2026). This is BEA’s standard annual update process, conducted every year, not an ad hoc 2026 intervention; what is procedurally novel this cycle is the simultaneous same-day release of national, industry, and regional economic accounts for the first time. The update additionally incorporates newly available source data unrelated to the deflator changes, including Census Bureau’s new Annual Integrated Economic Survey and IRS Statistics of Income tabulations, both of which will further revise historical GDP independent of the PCE methodology question. The chain-weighted index methodology underlying GDP calculation itself, in use since 1996, is not being altered; only the price inputs feeding that calculation are.

III. Independent Quantification and Its Genuine Uncertainty

Independent modeling from Underlying Inflation, a macroeconomic research firm that constructed alternative deflators using BLS producer price data ahead of the BEA’s formal disclosure, estimates the aggregate effect at approximately 0.1 percentage points on core PCE year over year, with the three components’ effects only partially additive, two pushing the reading down, one (legal services) tilted modestly upward. This sits meaningfully below the 0.1 to 0.3 percentage point range cited by economists surveyed for broader financial press coverage (Schwab, 2026), a divergence the research firm itself attributes to genuine unresolved uncertainty about the BEA’s final deflator construction, which had not been fully disclosed as of this writing.

IV. The Political Economy of the Timing

The revision’s significance is inseparable from the FOMC’s internal posture and from an extraordinary, well-documented pressure campaign against The Federal Reserve’s independence, one that substantially predates and extends beyond this single revision. At its July 29 meeting, the Committee voted 9 to 3 to hold its target range at 3.50 to 3.75 percent, where it has stood since December 2025; the three dissenting officials, Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan, favored a rate increase specifically on inflation persistence grounds (Irwin, 2026). On September 4, 2026, President Trump escalated that pressure substantially beyond rhetoric, posting on Truth Social, “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT… The Fed Board, with its great new leader, must get smart, BE PATRIOTS for a change,” and repeating the threat later that day in the Oval Office. The trade relationships implicated, the United States ran goods deficits exceeding $1.2 trillion in 2025 with partners including Mexico, China, Canada, Germany, and Japan, are not a marginal threat (Mangan, 2026; Yahoo Finance / 24/7 Wall St., 2026).

This escalation has clear antecedent. Over the preceding months, Trump repeatedly threatened to remove then-Fed Chair Jerome Powell before his term expired, while the Department of Justice pursued a criminal investigation into cost overruns on the Fed’s headquarters renovation. Federal Judge James Boasberg, ruling on a motion to quash DOJ subpoenas issued to the Fed, found on the record that “the Government has offered no evidence whatsoever that Powell committed any crime other than displeasing the President,” and concluded that the subpoenas’ dominant purpose was to harass and pressure Powell into either yielding to the President or resigning (Georgia Public Broadcasting, 2026). This is a judicial finding, not a partisan characterization, and it establishes a documented, adjudicated precedent for the current pressure on Powell’s successor and on the institution generally. Separately, Trump’s financial disclosures document an escalating pattern of securities trading directly relevant to his rate-cut demands. An initial disclosure covering trades from August 28 to October 2, 2025, put the maximum value of his bond purchases at over $337 million (Bose, 2025). That figure is now materially outdated. His full calendar-year 2025 disclosure, filed June 30, 2026, reports more than 14,000 individual stock trades alone, independently valued at up to $1.06 billion by Bloomberg and up to $1.4 billion by the Financial Times, and a subsequent periodic filing discloses an additional 3,555 trades worth up to half a billion dollars in the first quarter of 2026 alone, an average of approximately 50 trades per market-open day (Warren & Garcia, 2026). Bonds carry an inverse relationship to interest rates, such that bondholders, including Trump, realize capital gains when rates fall (Himmelsbach, 2026). The trajectory of this trading activity, expanding rather than static since the original bond disclosure, substantiates rather than diminishes the underlying conflict-of-interest concern given Trump’s simultaneous public campaign to compel a rate cut.

The appropriate historical baseline for evaluating this pressure is President Nixon’s campaign against Fed Chair Arthur Burns in 1971 and 1972, the episode economists and historians of the institution most commonly invoke when discussing threats to Federal Reserve independence. That campaign was conducted privately and became public only decades later, through leaked White House tapes and Burns’s own diaries. The current campaign is materially different in kind, not merely degree: it is conducted publicly, in real time, and is substantiated by an actual federal criminal investigation, a federal judge’s on-record ruling, and repeated public threats from the president to destroy global trade relationships if his demand is not met. Gary Richardson, who served as the Federal Reserve’s own official historian from 2012 to 2016, has assessed the current campaign directly, describing it as “an order of magnitude more than has ever happened” (Boston Globe, 2026). This is not a partisan assessment; it is the judgment of the individual most professionally positioned to compare the present moment against the full historical record of presidential pressure on the institution.

Against that backdrop, UBS economist Alan Detmeister, a former Federal Reserve staffer, has publicly noted that a methodology change lowering the headline inflation reading arrives at a moment that measurably eases the case for the rate cuts the administration is now demanding under threat of a trade embargo. Detmeister was careful to characterize the actual magnitude as unresolved, describing the revision’s ultimate impact as “a bit of a black box” (Schwab, 2026). BEA’s stated rationale, correcting deficient legal-services data and an outdated software deflator, is independently documented in the agency’s own technical materials and should be evaluated on its own evidentiary merits. It should also be evaluated against its timeline: BEA states the underlying legal-services data problem began in 2023, yet the agency did not publish its planned correction until June 2026, roughly three years later. That gap in timing has not been publicly explained by BEA and is a legitimate, still-open question, distinct from the separately documented technical merits of the fix itself.

V. Transmission to Small Business Financing Costs

A downward revision to The Federal Reserve’s preferred inflation gauge does not itself lower borrowing costs; it alters the informational input the Committee weighs when setting policy, in this instance amid direct executive pressure, judicially documented in the Powell matter and escalated publicly in the September 4 trade threat, to reach a predetermined conclusion. A modestly lower core PCE reading marginally strengthens the case, already contested within the Committee itself, for holding or cutting rather than raising. For small business borrowers, the operative distinction is between a change in measurement and a change in underlying economic conditions: input costs, wage pressures, and financing rates a firm actually faces are unaffected by a BEA deflator revision, even where that revision subsequently influences monetary policy through its effect on The Federal Reserve’s own reaction function, or through the documented political pressure surrounding that function this cycle.

VI. The Bottom Line

The September 30 revision should not be evaluated in isolation from the documented pattern surrounding it: a judicially confirmed campaign to pressure a sitting Fed chair through a baseless criminal investigation, a publicly disclosed and directly relevant financial conflict of interest exceeding $337 million, and an explicit presidential ultimatum threatening over a trillion dollars in global trade to compel a specific monetary policy outcome. BEA’s technical justification for the revision is independently documented and deserves evaluation on its own evidentiary merits, not automatic acceptance, particularly given the unexplained gap between when the underlying data problem reportedly began and when the correction was announced. Firms with financing decisions pending around this period should treat the revised PCE reading, and any accompanying revisions to reported GDP growth, as one input among several rather than as evidence of a changed cost environment, and should base borrowing decisions on directly observed financing terms rather than on headline inflation or growth commentary generated in the weeks following the revision’s release.