Two measures of core inflation: A comparison

Abstract

Trimmed-mean personal consumption expenditure (PCE) inflation does not clearly dominate PCE inflation excluding food and energy in real-time forecasting of headline PCE inflation. However, trimmed-mean inflation is the superior communications and policy tool because it has been a lessbiased real-time estimator of headline inflation and because it more successfully filters out headline inflation’s transitory variation, leaving only cyclical and trend components.