Economic Event · monthly

Personal Consumption Expenditures (PCE) Inflation

Source: Bureau of Economic Analysis (BEA)Release: Last business day of monthTime: 8:30 AM ET

The BEA releases the PCE Price Index monthly as part of the Personal Income and Outlays report. The release is around the last business day of each month at 8:30 AM ET, and comes about two weeks after CPI for the same reference month. PCE is the Federal Reserve's preferred inflation gauge. It differs from CPI in weighting (especially healthcare services, which gets much more weight in PCE) and measurement methodology. Core PCE (ex food and energy) is the specific number the Fed targets at 2%. Because PCE follows CPI and PPI by two weeks, markets can largely pre-compute the PCE print, but surprises still move markets given the Fed's focus on this number.

Why It Matters

PCE became the Fed's preferred inflation gauge in 2000 and has since been the number markets ultimately reference when thinking about Fed policy. The move from 7% headline PCE in June 2022 to sub-3% by mid-2024 enabled the Fed to begin cutting rates. Core PCE running above 2% has consistently been used by FOMC members to justify policy holds. Given the CPI/PPI pre-compute, PCE usually produces smaller surprises than CPI. But when the Fed cites PCE as the reason for action or inaction, the market impact can be large.

What to Watch For

•Headline PCE year-over-year
•Core PCE (Fed target)
•Core PCE month-over-month annualized
•Supercore PCE (services ex-housing)
•Personal income and spending in same release

Market Reaction Pattern

Hot core PCE: rates up, dollar up, equities mixed. Cold core PCE: rates down, dollar down, equities rally. Supercore increasingly cited, sub-indices can reverse headline reaction.