PCE inflation and core inflation

Julie Smith

No 1203, Working Papers from Federal Reserve Bank of Dallas

Abstract: This paper investigates the forecasting accuracy of the trimmed mean inflation rate of the Personal Consumption Expenditure (PCE) deflator. Earlier works have examined the forecasting ability of limited-influence estimators (trimmed means and the weighted median) of the Consumer Price Index but none have compared the weighted median and trimmed mean of the PCE. Also addressed is the systematic bias that appears due to the differences in the means of inflation measures over the sample. This paper supports earlier results that limited-influence estimators provide better forecasts of future inflation than does the popular measure of core inflation, PCE inflation minus food and energy; therefore, these limited-influence estimators are core inflation.

Keywords: Price levels; Forecasting (search for similar items in EconPapers)
Pages: 16 pages
Date: 2012
New Economics Papers: this item is included in nep-for, nep-mac and nep-mon
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:1203

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DOI: 10.24149/wp1203

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