For the CPI and PCE indices, create monthly (annualized) inflation rates
Order Instructions
Measures of inflation
Go to the Dallas Fed webpage (www.dallasfed.org) and look for the Trimmed Mean PCE
Inflation Rate data.
1. Download the historical series for the trimmed mean PCE inflation.
2. Go to the BLS website (bls.gov) and download historical series for CPI: All items in
U.S. city average, all urban consumers, not seasonally adjusted.
3. Go to either FRED or the Bureau of Economic Analysis (bea.gov) and download series
for PCE and PCE core (excluding food and energy).
4. For the CPI and PCE indices, create monthly (annualized) inflation rates. To review
how to annualize monthly percentage changes, check out the handout available on
CANVAS, “GrowthRatesandLogRules.pdf”. This material was covered in our first
lectures.
5. Plot the monthly annualized inflation rates for the trimmed-mean PCE, the CPI, the
PCE and PCE core on the same graph, from January 1977 to the most recent available
month. Label them carefully (you can use different markers as well) so that each series
is distinguishable from the others.
6. Write a one-page report explaining: (i) what do these indices measure? (ii) how are
they constructed? (iii) how does the trimmed-mean PCE differ from the two PCE
indices produced by the BEA? You can find documentation on these differences in the
related links section of the trimmed-mean PCE page at dallasfed.org
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