Forex glossary
PCE Price Index (Fed's Preferred Inflation Gauge)
The PCE price index is the BEA's US consumer-spending price measure, including spending on consumers' behalf. The Fed defines its 2% objective using the annual change in headline PCE. Core PCE excludes food and energy and helps assess trends, but does not replace the target measure. Check release dates in the BEA calendar.
Illustrative example
How does it work in practice?
Suppose a fictional release reports headline PCE inflation of 2.4% and core PCE of 2.1% annually. They cover different prices; the Fed's target measure is 0.4 percentage points above 2%.
A case to work through
Units before assessment
A fictional table shows headline PCE +0.2% monthly and +2.6% annually.
- Match the annual 2% objective with +2.6% annually.
- The gap is +0.6 percentage point.
What follows? Do not subtract an annual objective from monthly +0.2%.
Example boundary: This compares measures rather than predicting a Fed decision.
A useful distinction
PCE Price Index (Fed's Preferred Inflation Gauge) / Consumer Price Index (CPI)
CPI and PCE differ in coverage and construction and are not interchangeable labels.
Check your understanding
Select a comparable measure for the Fed's inflation objective.
Show the answer and explanation
Annual headline PCE
The objective uses annual change.
Publication, units and interpretation
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Related terms
Sources and documentation
- Personal Consumption Expenditures Price Index – BEA
Describes PCE price coverage and distinct monthly and annual observations.
Document read: - Statement on Longer-Run Goals and Monetary Policy Strategy – FOMC
Defines the Fed's objective as 2% annual PCE price-index change.
Document read: - Release Schedule – BEA
Separates publication timing and the reference periods of BEA releases.
Document read:
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.