Odd Lots
What Really Goes Into the Fed's Favorite Measure of Inflation?
Feb 29, 2024
Skanda Amarnath, executive director of Employ America, and Omair Sharif, founder of Inflation Insights, dive into the complexities of inflation measurement. They discuss why the Federal Reserve prefers the Personal Consumption Expenditure (PCE) index over the more commonly known Consumer Price Index (CPI). The episode explores how methodological differences can lead to varied inflation readings and the challenges economists face in gathering accurate consumer spending data. The conversation sheds light on the quirks of inflation metrics and their real-world implications.
49:53
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Quick takeaways
- The Fed prefers Personal Consumption Expenditure (PCE) over CPI for inflation measurement due to different category weightings and methodologies.
- Residual seasonality affects price anomalies in goods and services sectors, impacting economic interpretations during specific times like January.
Deep dives
Inflation Measurement Variability
Inflation measurements can vary significantly based on methodologies such as CPI and PCE, where factors like owner's equivalent rent and imputed financial services play a crucial role. The podcast delves into the comprehensive analysis of inflation measurement differences and the impact on economic interpretations.
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