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What Really Goes Into the Fed's Favorite Measure of Inflation?

Odd Lots

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Navigating Inflation Metrics: CPI vs. PCE

This chapter explores the nuances between the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) index, highlighting how methodological choices can lead to diverse inflation readings impacting various stakeholders. It discusses the challenges of gathering accurate consumer spending data, particularly in the context of declining survey responses, and the implications these have on inflation metrics. The chapter further examines how different approaches to measuring costs, particularly in the housing sector, can shape economic policies and public perceptions of inflation.

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