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Why do measures of inflation disagree?

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Abstract

Inflation as measured by the personal consumption expenditures price index is near historical low levels, below the Federal Reserve?s 2% longer-run goal. Another common inflation measure, the consumer price index, is also historically low, but remains closer to 2%. The recent gap between these two measures is due largely to the cost of shelter, which makes up a larger proportion of the CPI consumption basket. Based on history, the gap between the two inflation measures should close at a rate of 0.05 percentage point per month.

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  • Yifan Cao & Adam Hale Shapiro, 2013. "Why do measures of inflation disagree?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00001
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    File URL: http://www.frbsf.org/economic-research/publications/economic-letter/2013/december/inflation-measures-gap-personal-consumption-expenditures-pce-consumer-price-index-cpi/el2013-37.pdf
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    Cited by:

    1. Jeffrey Clemens & Joshua D. Gottlieb & Adam Hale Shapiro, 2016. "Medicare payment cuts continue to restrain inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.

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