# Inflation ## Measurement > [!warning] > > There's no such thing as THE inflation indicator! - [[gdp-deflator|GDP Deflator]] inflation - [[cpi|CPI]], more volatile than GDP-deflator inflation, more affected by volatile oil prices - [[ppi|PPI]], similar to [[cpi|CPI]]. - The change in the personal consumption expenditure deflator, which is the actual indicator used by Fed. ## Biases - **Substitution bias:** relative price changes over time, consumers switch to substitutions. Somewhat corrected through chain-weighting in [[gdp-deflator|GDP deflator]] calculation, but not in [[cpi|CPI]]. - Outlet bias: price of same product maybe lower in other channels. - Quality bias: consumers can switch to products with lower quality - New goods bias: new goods may not be included in the basket, e.g. new iPhone It is estimated that all these biases add up to an overestimation of inflation of up to 2%. ## Resources - *Coffee, consumer choice, and the consequences of Columbus.* - *Do We Need Google To Measure Inflation?* - A San Francisco Fed memo on the four inflation biases