PCE Inflation Rate — Historical Chart
PCEPIThe PCE Price Index is the Fed's preferred inflation gauge — broader than CPI and uses chain-weighting to adjust for substitution. The FOMC officially targets 2% PCE. More important than CPI for rate decisions.
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SOURCE: FEDERAL RESERVE ECONOMIC DATA (FRED) · 0 OBSERVATIONS
PCE (Personal Consumption Expenditures) is the Federal Reserve's preferred inflation measure — explicitly referenced in the Fed's 2% inflation mandate. It differs from CPI in that it uses a broader basket, adjusts for consumer substitution behavior, and typically runs 0.2-0.4 percentage points below CPI.
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Frequently Asked Questions
- What is PCE inflation?
- PCE (Personal Consumption Expenditures) price index measures price changes for all goods and services consumed by US households. Published monthly by the Bureau of Economic Analysis, it is the Federal Reserve's official inflation target measure — the Fed aims for 2% PCE inflation.
- Why does the Fed use PCE instead of CPI?
- PCE covers a broader range of expenditures, adjusts for consumer substitution (when consumers switch to cheaper alternatives), uses data from business surveys rather than consumer surveys, and is revised more frequently. The Fed believes it gives a more accurate picture of consumer purchasing power.
- What is the difference between PCE and core PCE?
- Headline PCE includes all items. Core PCE excludes food and energy. The Fed focuses primarily on core PCE for setting policy, as it removes volatile components and better reflects underlying inflationary trends.
- Why does PCE typically run below CPI?
- PCE includes more government-subsidized expenditures (like Medicare payments) and uses geometric averaging which accounts for substitution. It also has lower weights for shelter and healthcare than CPI. The gap is typically 0.2-0.4 percentage points.
Economic data sourced from the Federal Reserve Bank of St. Louis (FRED). Data is updated according to the release schedule of the issuing agency. Provided for informational purposes only and does not constitute investment advice.