What this actually is
A second inflation measure, produced by a different agency, and the one the Fed actually targets. It differs from CPI in two ways: it lets people substitute cheaper goods when prices rise, and it counts what employers and insurers pay for healthcare rather than only what patients pay. Both make it run a few tenths below CPI.
Why it matters to a person
When officials say "2% inflation," this is the index they mean. It arrives about two weeks after CPI, so markets have usually worked out the answer already — but it settles arguments.
For scale
Core PCE peaked near 5.6% in early 2022 against CPI's 9.1% headline, which is why the two camps of the inflation debate could both cite data.
How to read a release
Reading it
Because CPI and PPI arrive first, analysts can estimate PCE to within about 0.05% before release. A surprise here therefore means something in healthcare or portfolio management fees moved, not that consumer prices did something new.
The mechanism
The Fed's official 2% target measure; usually pre-empted by CPI and PPI but confirms the trend.
What to watch: Core PCE (the Fed's target measure). Arrives monthly; the effect typically lasts weeks. Impact tier 1 — Regime-setting: Moves everything and sets the direction for months or years. These are the discount rate, the level of earnings, the availability of credit, and the shocks large enough to stop the economy. If one of these turns, nothing else in the list matters much.
Its neighbourhood
Everything this entry connects to directly. Click any point to follow it.
What it moves next
Documented transmission: when this moves, these tend to move after it.
Dials it feeds
This factor is one input to a composite reading on the Analytics page.