Personal Consumption Expenditure (PCE) prices increased by only 1.25% during the 12 months ending January 2011.

FORBES: Our Schizophrenic Fed

The Personal Consumption Expenditure price index rose 0.5% in June, again due to higher gas prices.

FORBES: Magazine Article

He notes that with little fanfare the Fed recently switched its inflation benchmark from the Personal Consumption Expenditure deflator to the Consumer Price Index.

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The Fed closely watches a cumbersome-sounding index, the core personal consumption expenditure deflator, for signs of inflation, and in the last few months, that indicator has dropped within the range Bernanke has been looking for--after three years of coming in above his range.

FORBES: Magazine Article

Inflation, as measured by the core personal-consumption-expenditure deflator (excluding food and energy) fell to 0.7% at an annual rate in the third quarter, its lowest since 1962.

ECONOMIST: Overview