Recent reports ([WSJ RTE] [Bloomberg] [The Hill]) indicate that under consideration as one approach to curtailing entitlement spending growth is to resort to Chained CPI, as opposed to the current official CPI series, which is based on a quasi-Laspeyres formula.
An Econbrowser discussion of the Chained CPI is here, while a recent comparison of inflation rates measured using different indices is here. I reproduce figure 2 from that post.
Note that I seasonally adjusted the chained seasonally unadjusted series I could find; hence, the plotted series is not the BLS’s seasonally adjusted series. For purposes of thinking about trends in the level of one series versus another, the seasonal adjustment factor should not be of central importance.
Update, 11:30am Pacific: Reader Ed is exercised about the plotting of the core price indices. Hence, I plot the 3 month annualized inflation rates for CPI-all, the Chained CPI and personal consumption expenditure deflator.
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