Why Are Headline PCE and Median PCE Inflations So Far Apart?
Daniel Carroll and
Economic Commentary, 2020, vol. 2020, issue 24, 6
Mean (or headline) PCE inflation has typically fallen below median PCE inflation, and since 2012 the difference has been large. To understand the reasons for this trend, we investigate which components of the headline measure are contributing to the difference. We find that energy components, which frequently undergo wide price swings, and electronics, which have been steadily decreasing in price for decades, explain most of the difference between the two inflation measures. We argue that the outsized impacts of such components on headline PCE inflation reinforce the need for policymakers to consider both headline and median PCE inflation measures.
Keywords: inflation; measurement (search for similar items in EconPapers)
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