Here’s a cheat sheet of what you need to know before Federal Reserve Chairman Bernacke speaks before the House Financial Services Committee this morning.
Chain Deflator – Looks at how much cheaper (deflation) the cost of chains are since they’ve been manufactured in China instead of the U.S.
Consumer Price Index (CPI) – A list of items with prices so high it is ignored by the FOMC, CNBC, and WSJ.
Core Inflation (aka Ex-Everything) – When you delete every item from the Chain Deflator, CPI, and PCE.
Disinflation – If you “dis” (talk nasty to) inflation, it will get upset and vanish.
PCE (Personal Consumption Expenditure) – Secretly stands for Paid Chief Executive as it calculates what the chief executive of a publicly-traded company pays out of his own pocket for consumables after being compensated by the company. The PCE usually comes out to 0.
Preferred Gauge of Inflation – The FOMC examines all the inflation gauges – CPI, Chain Deflator, PCE and picks the lowest one.
P.S. Deflationary bonus indicator: Uncle Ben’s is Buy 1, Get 1 Free at the supermarket this week!