INFLATION INDICATORS
01/14/2025 |
The PCE has, since 2000, been the Fed’s preferred inflation measure. There are several key differences between it and the CPI. The PCE includes things you consume but don’t buy. Thus, healthcare is 16% of the PCE but 7% of CPI. Also, PCE basket updates are much timelier, and the PCE eschews imputed prices. Since 2000, PCE has averaged 0.39%/year lower than the CPI. It’s by far the better index.