# Personal Consumption Expenditures (PCE) The [[Bureau of Economic Analysis]] price index covering everything households consume — and, since 2000, the [[Federal Reserve]]'s officially preferred inflation measure. The Fed's 2% target is a *PCE* target, not a CPI target, a distinction almost entirely absent from political discourse. ## PCE vs. CPI | | PCE | [[Consumer Price Index]] | |---|---|---| | Publisher | BEA | BLS | | Basket | All consumption, incl. employer-paid healthcare | Out-of-pocket urban consumer purchases | | Substitution | Captures it (chained formula) | Largely doesn't (fixed basket, updated periodically) | | Typical reading | ~0.3–0.5pp *below* CPI | Higher | | Political salience | Low | Maximum | The wedge between the two is itself a politicization surface: an administration defending its record reaches for core PCE (lower, smoother, "what the Fed actually targets"); an opposition attacking it reaches for headline CPI (higher, includes the gas and groceries people feel). Both sides are citing real numbers — this is measure-switching, the first technique in the [[Indicator Cherry-Picking]] inventory. ## Latest reading *As of 2026-10-07 · refreshed monthly · the cross-indicator read lives at [[State of the US Economy]].* - **August 2026: PCE +3.4% y/y** (+0.3% m/m). **Core PCE +3.0% y/y** (+0.2% m/m). - **The usual wedge has flipped.** The table below says PCE typically runs *below* CPI. In August, **core PCE (3.0%) ran above core CPI (2.4%)**, while the two headline measures matched at 3.4%. Anyone reaching for "the Fed's preferred measure" to minimize inflation this year gets the opposite result on core. - **Fed projections (Sept 2026 median):** 2026 PCE inflation **3.7%**, core **3.4%**. - **Next:** September PCE on **Oct 29**. *Sources:* [BEA Personal Income and Outlays, Aug 2026](https://bea.gov/news/2026/personal-income-and-outlays-august-2026) · [Fox Business](https://www.foxbusiness.com/economy/august-2026-pce-inflation) · [BLS CPI](https://www.bls.gov/news.release/cpi.nr0.htm) · [Fed projections table](https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20260916.htm) ### Earlier snapshot (June 2026) The Iran-war oil shock (see [[Iran War 2026]]) flows into PCE more gently than into CPI because energy carries a smaller weight in the PCE basket — which is why administration messaging in spring 2026 leaned PCE-ward while headline CPI ran 3.8%. The Fed held the [[Federal Funds Rate]] at 3.5–3.75% through the transition from [[Jerome Powell]] to [[Kevin Warsh]], with the April 2026 FOMC splitting 8–4 partly over how much tariff- and war-driven inflation to look through. ## See Also - [[Consumer Price Index]] — the politically dominant sibling - [[Inflation Expectations]] — the forward-looking layer - [[Federal Funds Rate]] — the policy response