The government's favorite inflation metric ignores food and gas
To understand the true direction of the economy, policymakers intentionally ignore the two things that fluctuate most in your monthly budget: groceries and gasoline.
When the Federal Reserve sets interest rates, it looks past the volatile swings of the supermarket and the gas station to focus on the Core PCE index. This metric, which became the gold standard after Alan Greenspan critiqued older models in 2000, prioritizes 'shelter' and services. Because housing costs account for a massive 33% of the index, the government can track long-term trends without being distracted by a sudden spike in the price of eggs or a temporary oil shortage.
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