Helpful definitions

Consumer Price Index (CPI) - This index, compiled by the U.S. Bureau of Labor Statistics, examines the weighted average of the prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by averaging price changes for each item in the basket. Changes in the CPI are used to assess price changes associated with the cost of living. The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.

 

Personal Consumption Expenditures (PCE) Price Index - This index, published by the U.S. Bureau of Economic Analysis, measures price changes in consumer goods and services exchanged in the U.S. economy to reveal underlying inflation trends.

 

Supercore Inflation - Inflation metric used by the Federal Reserve that tracks services inflation in the Personal Consumption Expenditures (PCE) Price Index while excluding housing and energy costs. It functions as an even narrower gauge than core PCE inflation, which excludes seasonally volatile components such as food and energy.

 

Producer Price Index (PPI) – A measure of the change in the price of goods as they leave their place of production (i.e., prices received by domestic producers for their outputs either on the domestic or foreign market).

 

M2 Money Supply - Calculation of the money supply that includes all elements of M1 as well as “near money.” M1 includes cash and checking deposits, while near money refers to savings deposits, money market securities, mutual funds and other time deposits. These assets are less liquid than M1 and not as suitable as exchange mediums, but they can be quickly converted into cash or checking deposits.

 

Yield Curve - A line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity. There are three main types of yield curve shapes: normal (upward sloping curve), inverted (downward sloping curve) and flat.

 

Congressional Budget Office (CBO) - Since 1975, CBO has produced independent, nonpartisan analyses of budgetary and economic issues to support the Congressional budget process.