Inflation Indicator
PCE Price Index (Year-over-Year)
Updated 2026-03-28 · Monthly · Source: Bureau of Economic Analysis · Next release: 2026-04-25
Historical Trend
| Date | Value |
|---|---|
| 2026-03 | 2.5% |
| 2026-02 | 2.6% |
| 2026-01 | 2.5% |
| 2025-12 | 2.6% |
| 2025-11 | 2.4% |
| 2025-10 | 2.3% |
| 2025-09 | 2.1% |
| 2025-08 | 2.2% |
| 2025-07 | 2.5% |
What This Means for Business
PCE at 2.5% is closer to the Fed's 2% target than CPI, giving the Fed more room to consider rate cuts. The PCE tends to run 0.3-0.5 points below CPI because it accounts for consumer substitution (switching to cheaper alternatives when prices rise). For executives, the PCE trajectory suggests inflation is on a downward path, which should eventually lead to lower borrowing costs.
About PCE Inflation
The Personal Consumption Expenditures (PCE) price index is the Federal Reserve's preferred inflation measure. It tracks prices of goods and services consumed by households and adjusts its basket dynamically as consumers shift spending patterns.
Methodology
Unlike CPI, the PCE price index uses a chain-weighted formula that automatically adjusts the spending basket when consumers substitute goods. It also covers a broader range of spending, including items paid for by employers (like employer-provided health insurance). The BEA derives it from the National Income and Product Accounts.
Related Indicators
Frequently Asked Questions
Why does the Fed prefer PCE over CPI?
The Fed prefers PCE because it captures substitution effects (consumers switching to cheaper alternatives), covers a broader range of expenditures, and uses more comprehensive data. PCE also tends to be less volatile. CPI uses a fixed basket that can overstate inflation when consumers respond to price changes by changing their purchasing patterns.