What price index should monetary policymakers use to track the economy? For starters, it should have three characteristics: 1) encompass a substantial part of the economy; 2) be available without delay; 3) contain little noise from short-lived price fluctuations. Looking at the four prime candidates, there is no clear front-runner. From the top down: the CPI covers only consumption and includes highly volatile food and energy prices, but it is available quickly. The CPI less food and energy looks more stable and informative, but misses part of consumption. Personal consumption expenditures (drawn from the national income and product statistics) is available only at a quarterly frequency and after a delay of several months, a drawback that pertains also to the GDP deflator. The GDP deflator, though, covers all the economy. Which one to choose, then? Use the slide rule to look at different time periods to form an opinion.

How this graph was created: Select the four series, then apply Y-Axis Position to the right for the last two, as they have a different base year.

Suggested by Christian Zimmermann