When it comes to monitoring inflation, the Federal Reserve watches a different number than the rest of us.
Headlines detail the latest Consumer Price Index changes, but the central bank monitors something a lot more esoteric-sounding, the Personal Consumption Expenditure deflator, or PCE price index.
Both measure inflation based on changes in the prices consumers pay for goods and services, but the two numbers are calculated by different agencies using different factors. As the Cleveland Fed once put it, the CPI measures what households are buying and the PCE looks at what businesses are selling.
On Friday, the Commerce Department said third quarter gross domestic product, which is the value of goods and services produced, rose by a 3.5 percent annual rate, slightly above expectations.
The PCE rose 1.6 percent in the quarter, below the 2.2 percent economists had forecast. The "core" PCE, which excludes food and energy prices, rose 1.6 percent, according to the Commerce Department's Bureau of Economic Analysis, which does the calculation. The PCE for September won't get released until next week. It was up 2.2 percent annualized in August.
Earlier this month, the Bureau of Labor Statistics, which is part of the Labor Department, said CPI for September rose an annualized 2.3 percent. or 2.2 percent without food and energy.