Inflation Explained: What is Purchasing Power?
Key takeaways
- Purchasing power measures the buying power of your money.
- Purchasing power is influenced by inflation, an increase in the general level of prices, as measured by indexes, such as the Consumer Price Index and the Personal Consumption Expenditures (PCE) price index.
- When prices increase, purchasing power decreases.
- The Cleveland Fed’s Center for Inflation Research offers a wide range of resources to better understand inflation and its effects, including its impact on purchasing power.
Video summary
Research Analyst Calvin McElvain explains what purchasing power is, how it’s measured, and how inflation impacts it.
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Center for Inflation Research
The Center for Inflation Research helps policymakers, researchers, industry professionals, and the informed public better understand inflation. Explore commentary, research, and analysis on inflationary trends, and find out about upcoming inflation-related events.
Consumer Price Data and Measures Explained
Learn the differences between the consumer price index (CPI) and the personal consumption expenditures (PCE) price index. Find out what measures are used to gauge underlying inflation, or the long-term trend in prices, such as median and trimmed-mean inflation rates and core inflation.
Median PCE Inflation
Median PCE inflation is a measure of inflation computed by the Federal Reserve Bank of Cleveland. It ranks the components of PCE inflation and picks the one in the middle. Its construction makes it less sensitive to short-lived price fluctuations, thereby better capturing the trend in prices. Released monthly.