A Comparison of the CPI and the PCE Price Index

I n the United States, there are two broad indexes of consumer prices: the consumer price index, or CPI, and the chain price index for personal consumption expenditures, or PCEPI. Because the indexes are similar in many respects, the inflation rates measured with them often move in parallel. There are, however, some important differences, which, at times, can lead to large gaps between CPI and PCEPI inflation rates. In 1998, for example, the CPI rose 1.5 percent, while the PCEPI increased just 0.7 percent. The discrepancy was even larger excluding food and energy prices: the core CPI grew 2.4 percent in 1998, while the core PCEPI rose just 1.2 percent.