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

Odd Lots

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Inflation Metrics: CPI vs. PCE

This chapter examines the distinctions between the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) index in measuring inflation. It discusses the Federal Reserve's preference for PCE and the historical context behind this choice, highlighting how it reflects consumer behavior more accurately compared to the CPI. The chapter also explores the recent divergence between core CPI and core PCE, shedding light on the complexities of current inflation dynamics.

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