Rethinking Inflation Heterogeneity: Evidence From National Accounts

This research challenges the common view that low-income households always face higher inflation than wealthier ones. Using new income-stratified PCE price indices aligned with national accounts, the study finds that inflation inequality has been smaller and more dynamic than CPI-based studies suggest. From 2000–2012, lower-income households did experience higher inflation, but between 2012–2023 the trend reversed—driven largely by rising financial services costs that disproportionately impacted higher-income households. The findings highlight how different measures of inflation (CPI vs. PCE) can shape our understanding of inequality and income growth.