The CPI–PCEPI Inflation Differential: Causes and Prospects

The Federal Open Market Committee’s inflation target is stated in terms of the personal consumption expenditures price index (PCEPI). The PCEPI, like the consumer price index (CPI), measures inflation in the expenditures of households, but these indexes differ in purpose, scope, and construction. Notably, since the CPI is used as the reference rate for numerous financial contracts, one can derive implied longer-run CPI inflation forecasts from financial contracts. Such forecasts are widely reported. But if policymakers are to use these forecasts to guide their pursuit of the inflation target, they need to translate these CPI inflation forecasts into corresponding implied PCEPI forecasts. Since 1978, CPI inflation has averaged 0.3 percentage points above PCEPI inflation, but this differential has varied significantly over time. In this Commentary, we explain why, investigate a key historical episode, and provide an updated estimate of the likely differential going forward.

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Raiders of the Lost High-Frequency Forecasts: New Data and Evidence on the Efficiency of the Fed's Forecasting

Finance and Economics Discussion Series ◽

10.17016/feds.2020.090 ◽

2020 ◽

Vol 2020 (089) ◽

pp. 1-56

Author(s):

Andrew C. Chang ◽

◽

Trace J. Levinson ◽

Keyword(s):

Forecast Errors ◽

Time Varying ◽

Open Market ◽

Federal Open Market Committee ◽

Forecast Revisions ◽

Consumption Expenditures ◽

Inflation Forecasts ◽

Board Of Governors ◽

Personal Consumption ◽

Reserve System

We introduce a new dataset of real gross domestic product (GDP) growth and core personal consumption expenditures (PCE) inflation forecasts produced by the staff of the Board of Governors of the Federal Reserve System. In contrast to the eight Greenbook forecasts a year the staff produces for Federal Open Market Committee (FOMC) meetings, our dataset has roughly weekly forecasts. We use these new data to study whether the staff forecasts efficiently and whether efficiency, or lack thereof, is time-varying. Prespecified regressions of forecast errors on forecast revisions show that the staff's GDP forecast errors correlate with its GDP forecast revisions, particularly for forecasts made more than two weeks from the start of a FOMC meeting, implying GDP forecasts exhibit time-varying inefficiency between FOMC meetings. We find some weaker evidence for inefficient inflation forecasts.

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The Choice of Medical Care Price Index: Implications for Life Care Plan Valuations

Journal of Forensic Economics ◽

10.5085/jfe-469 ◽

2020 ◽

Author(s):

Patrick Gaughan ◽

Viviane Luporini

Keyword(s):

Price Index ◽

Consumer Price Index ◽

Care Plan ◽

Life Care ◽

Consumption Expenditures ◽

Care Plans ◽

Personal Consumption ◽

Inflation Rates ◽

The Difference ◽

Using Data

Abstract This study examines the importance of using appropriate inflation measures in the estimation of a life care plan value. Using data from 1989 through 2018, we compare medical inflation rates measured by the Consumer Price Index Medical (CPI Medical) and the Personal Consumption Expenditures Health (PCE Health) price index while discussing the reasons why the indices differ. We also explain why certain policymakers favor the Personal Consumption Expenditure (PCE) over the Consumer Price Index (CPI). In demonstrating how the value of life care plans can differ based upon the use of either of these indices we applied 10-year historical arithmetic averages of both indices to a large hypothetical life care plan. Our calculations indicate that using the CPI versus the PCE results in a difference that is 7.5 times the initial value of the plan, after accumulation of nominal annual values that are undiscounted to present value. We also show how the difference between using the CPI Medical versus the PCE Health increases over time, implying that using one price index or the other will have a greater impact on life care plan values the longer the projection period. Our analysis shows that experts should consider the use of PCE indices when valuing life care plans.

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Transmission mechanism of monetary policy and response to outside shocks in 2020 by National Bank of the Republic of Kazakhstan

Bulletin of "Turan" University ◽

10.46914/1562-2959-2021-1-1-179-185 ◽

2021 ◽

pp. 179-185

Author(s):

G. G. Ilyassova ◽

Z. N. Abiyeva ◽

G. A. Perneyeva

Keyword(s):

Monetary Policy ◽

Money Supply ◽

Price Index ◽

Consumer Price Index ◽

Base Rate ◽

Transmission Mechanism ◽

Goods And Services ◽

Inflation Forecasts ◽

National Bank ◽

The Republic

The article examines the features and current state of monetary policy and transmission mechanism of the National Bank of Kazakhstan. The transmission mechanism is not a tool to achieve the goals set for the development of the modern economy. This mechanism is a set of interactions in economic processes through which the results of decisions or transactions in the framework of monetary policy affect the economy. In this regard, the article describes the level of inflation and its impact on the level of prices for goods and services. The situation with the use of the consumer price index to calculate inflation, calculated on the basis of the analysis of prices in the portfolio of consumer goods and services of the Ministry of National Economy of the Republic of Kazakhstan, is analyzed in detail. Macroeconomic and microeconomic factors, reflecting the viable direction of the monetary policy of the Republic of Kazakhstan, affect the level of the consumer price index. To make decisions, the NBRK conducts research to determine inflation forecasts. Inflationary expectations make it possible to assess the possible impact on the economy. In this context, the article states that the NBRK's inflation target will be achieved through the following channels (base rate, exchange rate and money supply). The conclusion is based on the fact that, given the global pandemic around the world, one can see the NBRK's expansionary monetary policy and decisions to lower the base rate, increase the money supply and stabilize the currency.

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Modeling Commodity Prices, Inflation And Monetary Policy Response

International Business & Economics Research Journal (IBER) ◽

10.19030/iber.v9i11.41 ◽

2010 ◽

Vol 9 (11) ◽

Author(s):

Punita Rao

Keyword(s):

Monetary Policy ◽

Price Index ◽

Consumer Price Index ◽

Wholesale Price ◽

Commodity Prices ◽

Rate Of Change ◽

Inflation Forecasting ◽

Wholesale Price Index ◽

Personal Consumption ◽

Index Measurement

Inflation is generally defined as the rate of change of some price index. Well known examples are the Consumer Price Index, Wholesale Price Index and the personal consumption expenditure price Index. Measurement and forecasting of these indices has been a subject of ongoing debate and research in recent years. This paper attempts to contribute to the debate within the limits of an empirical and country specific. Section 1 deals with the transmission of Monetary policy to growth. Section 2 examines a simple model of inflation forecasting. Section 3 addresses the unfinished debate on Prices and Monetary management.

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Evolution of Consumption Expenditures of Population of the Republic of Moldova

International Conference Innovative Business Management & Global Entrepreneurship (IBMAGE 2020) ◽

10.18662/lumproc/ibmage2020/23 ◽

2020 ◽

Author(s):

Mircea Gutium ◽

Keyword(s):

Price Index ◽

Aggregate Demand ◽

Consumer Price Index ◽

Positive Influence ◽

Purchasing Power ◽

The European Union ◽

Consumer Spending ◽

Consumption Expenditures ◽

Republic Of Moldova ◽

The Republic

Consumption expenditures is one of the key indicators that reflects the purchasing power of the population. Purchasing power in turn shows the level of social welfare. The population with a stable evolution of consumer spending is at least able to maintain its level of consumption with inflation. In addition, if consumer spending rises in proportion to the level of inflation, there is an increase in welfare and living standards. High level of consumption has positive influence on business. greater aggregate demand will generate more profits, boost company development, and foster job creation. In this study, the affirmation was verified that the consumer price index is one of the factors that influence the standard of living, but not primarily. The following scientific methods were used to approve or reject the statement: scientific abstraction, analysis and synthesis, graphical and tabular method, comparative analysis method, correlation and regression analysis. In this study there was made comparison of consumption evolution and its structure in the Republic of Moldova and in the European Union to identify the difference in welfare. The linear regression model between the consumer price index and growth rate of household expenditures was elaborated.

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Analytical Study and Prediction of Consumer Price Index for Rwanda Using Data Mining Techniques

International Journal of Scientific and Research Publications (IJSRP) ◽

10.29322/ijsrp.9.11.2019.p95117 ◽

2019 ◽

Vol 9 (11) ◽

pp. p95117

Author(s):

Pascal Sindayiheba ◽

Jean De Dieu Rwamasunzu ◽

Papias Niyigena

Keyword(s):

Data Mining ◽

Analytical Study ◽

Price Index ◽

Consumer Price Index ◽

Data Mining Techniques ◽

Using Data

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Dampak Penerapan Perbankan Syari’ah Terhadap Pertumbuhan Ekonomi Negara: Kajian Perbandingan Malaysia dan Indonesia

ILTIZAM Journal of Sharia Economic Research ◽

10.30631/iltizam.v1i1.94 ◽

2017 ◽

Vol 1 (1) ◽

pp. 37

Author(s):

Hansen Rusliani

Keyword(s):

Gross Domestic Product ◽

Response Function ◽

Price Index ◽

Vector Autoregression ◽

Consumer Price Index ◽

Domestic Product

Penelitian ini bertujuan untuk mengetahui dampak perbankan syari’ah terhadap pertumbuhan ekonomi di Indonesia dan Malaysia. Data yang digunakan dalam penelitian ini merupakan data primer (interview) dan data sekunder dalam bentuk bulanan yang diperoleh dari Badan Pusat Statistik Ekonomi dan Keuangan Indonesia Bank Indonesia (SEKI-BI) dan Statistik Perbankan Syari’ah Bank Indonesia (SPS-BI) serta data dari Bank Negara Malaysia dan Departemen Statistik Malaysia dalam periode waktu kurun waktu 16 tahun, 2000 sampai dengan 2015. Observasi penelitian dilakukan di Indonesia dan Malaysia untuk memperkaya analisis. Penelitian ini menggunakan Vector Autoregression (VAR), Uji Kointegrasi serta dikombinasikan dengan Response Function (IRF) dan Decomposition (FEVD) untuk melihat interaksi antara faktor makro ekonomi dengan pembiayaan dalam jangka panjang. Adapun variabel yang digunakan adalah total pembiayan syari’ah (Total Syari’ah Financing) dan Gross Domestic Product (GDP) sebagai representasi pertumbuhan ekonomi. Untuk tambahan variabel digunakan Consumer Price Index (CPI) sebagai representasi tingkat inflasi. Hipotesis penelitian yaitu terdapat pertumbuhan ekonomi setiap tahunnya dikedua negara tersebut pasca krisis moneter.

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