Price Level

The personal consumption expenditures price index (PCEPI) is constructed by the Bureau of Economic Analysis. It measures the prices people pay when buying goods and services in the United States. Economists generally prefer the PCEPI to other measures of the price level because it considers a wide range of consumer expenses while also reflecting changes in consumer behavior. Other measures of the price level, like the consumer price index (CPI), do not reflect changes in consumer behavior.

The PCEPI presented above uses January 2020 as the base year. Each observation is expressed as a percent of the observation in January 2020. For example, the price level in June 2021 was 104.0—or, 4 percent higher than it had been in January 2020.

The Federal Reserve conducts monetary policy to achieve 2 percent inflation, on average. With this in mind, we have presented the price level alongside a 2-percent growth path, which reflects what the level of prices would be if inflation had averaged 2 percent since January 2020. For example, in June 2021 the 2-percent growth path was 102.8, meaning that the price level would have been just 2.8 percent higher in June 2021 than it had been in January 2020 if inflation had merely averaged 2 percent over the period.

The difference between the price level and the 2-percent growth path is expressed in percentage points and indicates how much higher the price level is relative to what it would have been if prices had merely grown by 2 percent over the period. For example, in June 2021 the price level was 104.0 - 102.8 = 1.2 percentage points higher than it would have been with 2 percent inflation.