What We Talk About When We're Talking About Inflation

Most of us are familiar with the Consumer Price Index (CPI) as the headline measure of inflation. However, at the January 2012 Federal Open Market Committee, the Fed declared it would use the Personal Consumption Expenditure price index (PCE). Since the indexes are calculated differently in weight, scope, and formula, it will yield different measures of inflation. The difference will impact how investors plan to fight the rising inflation that is spurring fears of currency devaluation.