So many ways to measure inflation. From Marketplace, I'm Nancy Marshall-Gensar in Washington.

The Federal Reserve has long relied on the PCE, the Personal Consumption Expenditures Price Index,

as its preferred measure of inflation. But there's another inflation yardstick. It's known as

the trimmed mean. It tries to smooth out big inflation

bumps. Lately, it's been running below the PCE. Last week, the headline PCE for April came in at

3.8%. The Dallas Fed's trimmed mean came in at 2.3%, much closer to the Fed's 2% target.

So what accounts for the difference and why does this

matter? We're joined now by Lauren Seidel Baker, an economist at the consultancy firm, ITR economics.

Lauren, welcome. Thank you. Great to be here. So what is the trimmed mean and how is it calculated

versus the way the PCE is figured out?

So the trimmed mean is an alternate look at core inflation. However, as you mentioned, instead

of stripping out the same volatile categories month to month, the trimmed mean, it strips out

whatever rose or fell the most. So every month, the Dallas Fed basically lines up every

individual component of the PCE and they take off the two tails. It's 24% of the weight from

the lower tail, those categories that either saw deflation or very, very low inflation, and then 31% of the weight

in the upper tail, so those prices that rose the most.

And what types of inflation is the trimmed mean stripping out?

There are actually a lot of categories that fall into this weighting.

Right now, it's going to be things like oil prices that are rising

very quickly for one reason or another. If you look at the April data of the 177 total components,

they actually stripped out 57 on both the upper and lower end. So it's oil, but it's also other

things like jewelry with high gold prices

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