Core PCE Price Index

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Core Personal Consumption Expenditures (PCE) Price Index measures changes in the prices of goods and services purchased by consumers and nonprofit organizations, excluding food and energy.

The Fed uses the core PCE index as its main measure of inflation.

The core PCE price index is less volatile than the PCE price index because it excludes more volatile food and energy prices.

What is the Core PCE Index?

Core Personal Consumption Expenditures (PCE) Price Index is an economic indicator that measures inflation by tracking changes in the prices of goods and services purchased by U.S. consumers, excluding food and energy costs.

It is considered a "core" PCE index because it focuses on underlying inflation trends by removing the volatile components of food and energy prices.

The Federal Reserve watches this indicator closely because it helps them assess the state of the economy and guide monetary policy decisions.

Prices are weighted by total spend per item. It measures price changes from the consumer's perspective.

Why is the Core PCE Index Important?

The core PCE price index is important for several reasons:

  1. Inflation Measurement: It is an important measure of inflation, providing insight into changes in the prices of goods and services over time. By excluding volatile food and energy components, it is a more stable and accurate reflection of underlying inflation trends.
  2. Monetary Policy: The Federal Reserve uses the core PCE price index as its preferred measure of inflation when setting monetary policy. The Fed's inflation target is usually around 2%. The index helps policymakers determine whether to adjust interest rates or use other monetary tools to control inflation and maintain price stability.
  3. Economic health: The core PCE price index is an important indicator of the overall health of the economy. A stable and moderate inflation level is considered to be conducive to economic growth. However, high inflation can erode purchasing power and create economic uncertainty, while low inflation or deflation can signal weak demand and economic stagnation.

A higher-than-expected reading should be considered bullish for the dollar

A lower-than-expected reading should be considered bearish for the dollar.

Who publishes the core PCE index?

The Core PCE Price Index is calculated and published by the Bureau of Economic Analysis (BEA), an agency of the U.S. Department of Commerce.

Data for the index is released as part of the monthly Personal Income and Expenditure Report.

BEA collects and analyzes data on consumer spending patterns from a variety of sources, including household surveys, retail sales data, and information from businesses and government agencies.

When will the core PCE index be released?

The Core PCE Price Index is released on a monthly basis, usually on the last working day of each month.

Data is available on the BEA website.

This release includes month-on-month and year-on-year changes in the index, providing timely and detailed information on the inflationary status of the U.S. economy.

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