PCE Inflation: The Fed's Preferred Gauge, and How It Differs From CPI

What the PCE price index measures

The personal consumption expenditures (PCE) price index tracks the prices of goods and services bought by people living in the United States, or bought on their behalf. The Bureau of Economic Analysis (BEA) builds it as part of the national accounts, the same framework that produces GDP, and publishes it each month in the Personal Income and Outlays report, about four weeks after the month ends.

Two numbers lead every release:

• PCE inflation (headline): the change in the price index for all personal consumption.
• Core PCE inflation: the same index excluding food and energy, whose prices swing the most from month to month.

Both are reported as a one-month change, seasonally adjusted, and as a change from the same month a year earlier. The 12-month figure is the one usually quoted, and the one the Fed's target refers to.

Latest PCE and core PCE inflation (August 2026)

BEA's August 2026 report, published on 30 September 2026, showed the PCE price index up 0.3 percent in the month and 3.4 percent on a year earlier. Core PCE rose 0.2 percent in the month and 3.0 percent on the year.

PCE figures are BEA data as revised in its annual update of 30 September 2026, which reached back to January 2021; they are calculated from the published index levels. CPI-U figures are from the Bureau of Labor Statistics (BLS).

Headline PCE inflation rose by about a point between February and May as energy prices jumped, while core PCE stayed between 2.9 and 3.2 percent all year. The last month in which PCE inflation was at or below the Fed's 2 percent goal was February 2021, at 1.8 percent.

PCE vs CPI: scope, weights and formula

Both indexes measure consumer prices, and the PCE index uses CPI price data for many of its components. They differ in what they cover, how they weight it and how they combine it. BEA's reconciliation sorts the gaps into four effects: scope, weight, formula, and other differences such as seasonal adjustment.

Scope. Health services provided to households through Medicaid count as consumer spending in the PCE but not in the CPI, which covers only what households pay themselves. That is part of the reason health care services carry about two and a half times the weight in the PCE.

Weights. Because total PCE spending is larger, housing is a much smaller share of it. In every month from January to August 2026, BEA's reconciliation shows shelter's larger CPI weight adding between 0.03 and 0.10 percentage point to the monthly CPI change relative to PCE. Gasoline also weighs more in the CPI. In March 2026, when the BLS gasoline index jumped 21.2 percent, the CPI rose 0.9 percent and the PCE index 0.6 percent. BEA's reconciliation attributes 0.23 percentage point of that gap to gasoline's heavier weight in the CPI.

Formula. The CPI holds quantities fixed for a year, so when beef gets dearer it assumes households keep buying as much beef. The PCE formula updates weights each period, which allows for switching to cheaper items. Philip Jefferson, then a Fed governor, said in a 2023 speech that this substitution is one reason PCE inflation is "almost always" lower than CPI inflation. In BEA's reconciliation for 2026 the formula effect has been small, at most 0.02 percentage point in any month; weights and coverage account for most of the gap.

Over long periods the gap adds up. From August 2006 to August 2026 the CPI-U rose 64.3 percent and the PCE price index 54.6 percent: about 2.5 percent a year against 2.2 percent. The rule has exceptions: from January to March 2026, 12-month PCE inflation ran above CPI inflation. How the CPI itself is built is covered in our guide to the consumer price index.

Why the Fed targets PCE inflation

The Federal Open Market Committee (FOMC) states its goal as "inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures." It first set that formal target in January 2012 and reaffirmed the statement most recently in January 2026.

The preference is older than the target. In its February 2000 Monetary Policy Report, the Fed switched its inflation forecasts from the CPI to the PCE index and gave three reasons: the PCE formula reflects the changing composition of spending and "thereby avoids some of the upward bias associated with the fixed-weight nature of the CPI"; its weights rest on a more comprehensive measure of spending; and its history can be revised as better data and methods arrive, giving a more consistent series. The Fed's current explainer adds that the PCE index adapts more quickly to changes in how Americans spend.

The target refers to headline PCE inflation, food and energy included. Officials watch core PCE because, as the Fed's June 2025 Monetary Policy Report put it, current and near-term core inflation rates "tend to outperform headline inflation rates as predictors of the medium-term behavior of headline inflation." The target itself still includes food and energy.

What the Fed expects for PCE inflation

FOMC participants publish projections four times a year. The September 2026 medians, measured from the fourth quarter of one year to the fourth quarter of the next, put PCE inflation well above target this year and back to 2 percent only in 2029.

The same day, 16 September 2026, the Fed raised its target range by a quarter point to 3.75 to 4 percent, its first increase since July 2023, saying inflation "remains elevated." The minutes record Fed staff attributing the rise in inflation from a year earlier mostly to past tariff increases, higher energy and input costs tied to geopolitical developments, and higher prices for technology-related consumer goods associated with the AI buildout. Every annual CPI rate back to 1914 is in the US inflation rate by year table.

PCE release dates and revisions

BEA publishes PCE inflation in the Personal Income and Outlays report at 8:30 a.m. Eastern Time. The dates below are from BEA's release schedule as of 27 October 2026.

The CPI for the same month comes out about two weeks earlier, and the PCE index draws extensively on CPI price data, so the CPI release gives an early read on the PCE figure. The CPI report for October 2026 is due on 10 November.

Unlike the unadjusted CPI, PCE figures are revised. Each monthly release can change the previous months, and an annual update revises several years: the 30 September 2026 update reached back to January 2021. January 2026 is an example. BEA's first estimate, published on 13 March 2026, put 12-month PCE inflation at 2.8 percent and core at 3.1 percent; on the current data they are 2.7 and 2.9 percent. A figure quoted months ago may no longer match BEA's tables.