Reconciling the CPI and the PCE Deflator

The Federal Government produces two major inflation measures for consumption goods and services . The Consumer Price Index (CP1), published by the Bureau of Labor Statistics, is the most widely used aggregate price index, as well as the major source of information on price trends for individual consumption goods and services. An alternative aggregate consumption inflation measure, the Implicit Price Deflator for Personal Consumption Expenditures (PCE Deflator), published by the Bureau of Economic Analysis, is a by-product of the construction of the National Income and Product Accounts . For at least a decade, users have noted that the CPI and the PCE Deflator often give different measures of the rate of inflation . How, these users ask, can we reconcile the difference between the CPI and the PCE Deflator? This article provides an answer to that question .