PCE Price Index (PCE)

PCE stands for Personal Consumption Expenditures. Unlike the CPI, which prices a fixed basket chosen years earlier, the PCE adjusts its weights regularly to reflect how people actually shift their spending — for example, buying more chicken when beef gets expensive. This "substitution effect" generally makes PCE run slightly lower than CPI for any given period. The Federal Reserve targets PCE inflation, not CPI, which is why PCE surprises can move interest-rate expectations and bond markets sharply.

The PCE is published by the U.S. Bureau of Economic Analysis as part of the monthly Personal Income and Outlays report. Like CPI, the headline figure is a year-over-year percent change. There is also a core PCE that strips out food and energy — this is arguably the single number the Fed watches most carefully when deciding whether to raise, hold, or cut its benchmark interest rate. You can find scheduled release dates on the economic calendar and country-level inflation data under countries.

A practical confusion: CPI and PCE often tell slightly different stories in the same month, which can puzzle readers. The gap comes from three sources — different basket weights, the substitution adjustment, and the fact that PCE covers a broader range of spending (including health care paid by employers, for instance). Neither index is "wrong"; they measure related but distinct things. For market-data purposes, always note which index a central bank statement or news headline is referencing, because the policy implications can differ meaningfully.