The latest personal consumption expenditures price index, which measures the prices paid for goods and services, will come out Friday, Feb. 20.Other measures of inflation, including the consumer price index, are important. But the PCE is the one preferred by the Federal Reserve as they make monetary policy decisions.There are a lot of ways to measure changes in prices, but this is how the Fed has decided to define price stability: “A steady inflation rate of 2% using the PCE price index,” said Derek Tang, at Monetary Policy Analytics. PCE is more dynamic than the consumer price index, said Randy Kroszner, an economist at the University of Chicago and a former Fed governor himself.“It's a bit more representative of what people are actually buying today, rather than buying last year or a few years ago. It includes more people, and it also includes more types of payments,” he said.And more goods and services, said former Fed economist Ellen Meade, now a professor at Duke University.“It places a greater weight on health care, for instance, and it places less weight than in the CPI on housing,” she said.The PCE also captures spending on households’ behalf by others, said Bill English, another former Fed economist and Yale professor.“The fact that you don't pay directly for health insurance, maybe it's provided by your employer. Doesn't mean that indirectly, you don't pay for it in the end through lower wages, for example,” he said.And then there’s core PCE, which excludes food and energy prices.“By taking [those] out, you reduce the the noise in the measure, and you get a better signal of where inflation is likely to be over the next year or so,” English said. He said that matters for the Fed. Because they can’t change inflation this month, but they can use this data to inform their decisions about the future.