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Published on Mar 15, 2012
The Federal Reserve says inflation will be "subdued for the forseeable future" with inflation at 2% and they will rely on the PCE (Personal Consumption Expenditures) versus the CPI index. The reason inflation "appears" low is that the CPI is is overweighted in housing, which has been declining. But what happens to inflation when housing stabilizes and recovers? Additionally, the PCE is a rolling average of the CPI which tends to "understate" inflation.