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Inflation Measuring Price Changes. Date last updated: September 8 , 2014. DataPost. Federal Reserve Bank of San Francisco Economic Education Group. Inflation– Did You Know?. There are different measures of price levels: Consumer Price Index (CPI) Producer Price Index (PPI)

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  1. InflationMeasuring Price Changes Date last updated: September8, 2014 DataPost Federal Reserve Bank of San Francisco Economic Education Group

  2. Inflation– Did You Know? • There are different measures of price levels: • Consumer Price Index (CPI) • Producer Price Index (PPI) • Personal Consumption Expenditures Price Index (PCEPI) Source: Bureau of Economic Analysis Since 1980 prices have been increasing. Compared to 1980, consumers in 2010 were paying 131% more on average, according to the PCEPI. DataPost http://www.frbsf.org/education/teachers/datapost/index.html FRBSF Economic Education Group

  3. Measures of Price Levels • Fed’s Preferred Measure Sources: Bureau of Labor Statistics and Bureau of Economic Analysis Note: See PowerPoint file for references DataPost http://www.frbsf.org/education/teachers/datapost/index.html FRBSF Economic Education Group

  4. Using the PCEPI(Personal Consumption Expenditures Price Index) What is the percentage change in prices for all domestic personal consumption? (Current Price – Past Price) x 100 Past Price (107.3 – 87.6) x 100 87.6 = 22.6% This means that consumers are paying, on average, 22.6% more in 2013 for the same items as in 2003. DataPost Source: Bureau of Economic Analysis http://www.frbsf.org/education/teachers/datapost/index.html FRBSF Economic Education Group

  5. Personal Consumption Expenditures (PCE) Inflation 12-month Percent Change, Seasonally Adjusted through July 2014 TOTAL CORE Source: Bureau of Economic Analysis & FRBSF Calculations DataPost http://www.frbsf.org/education/teachers/datapost/index.html FRBSF Economic Education Group

  6. Annotated Chart NotesPersonal Consumption Expenditures (PCE) Inflation12-month Percent Change, Seasonally Adjusted through July2014 TOTAL– Includes all expenditures (a.k.a. “Headline Inflation”) TOTAL CORE CORE – excludes food and energy prices, which are typically more volatile Source: Bureau of Economic Analysis & FRBSF Calculations DataPost http://www.frbsf.org/education/teachers/datapost/index.html FRBSF Economic Education Group

  7. What Do You Think? • What is the Federal Reserve’s preferred measure of inflation in making monetary policy decisions? • What was headline inflation in June 2009? Core inflation in May 2012? • How would you describe the changes in headline inflation during the Great Recession? • What do you notice about the overall trend in “headline” inflation compared to “core”? DataPost http://www.frbsf.org/education/teachers/datapost/index.html FRBSF Economic Education Group

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