US Core PCE Inflation (Year-over-Year %)
US core Personal Consumption Expenditures price index, year-over-year percentage change, from January 1960 to the latest release (3.01 percent for August 2026). The Federal Reserve's preferred gauge of underlying inflation: the Fed's 2 percent goal is defined on headline PCE, and core PCE, which excludes food and energy, is the measure it watches most closely for the trend. Core PCE is generally smoother and lower than headline CPI inflation. Released monthly by the BEA late in the month, roughly two weeks after the matching CPI report. AUD-trader framing on the Fed reaction function and US/AUD rate differential implications.
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Core PCE YoY % derived from FRED PCEPILFE, January 1960 onwards. The Fed's preferred underlying inflation gauge. Green dashed line marks the 2 percent goal (formally set on headline PCE). Recessions shaded from 2001.
What is Core PCE?
The Personal Consumption Expenditures (PCE) price index measures the prices US households pay for goods and services, including those covered by employer health-care plans, Medicare, Medicaid, and other third-party expenditures that CPI excludes. Core PCE strips food and energy components for a less noisy underlying trend.
The Fed's Statement on Longer-Run Goals commits to 2 percent inflation measured by the annual change in the PCE price index. The goal is on headline PCE; core PCE is the Fed's preferred read of the underlying trend because it strips out volatile food and energy prices. "Symmetric" means the Fed cares about overshoots and undershoots alike. The August 2020 revision added flexible average inflation targeting, which allowed a period above target to make up for earlier undershoots; the August 2025 review dropped that make-up approach.
Core PCE vs Core CPI
| Attribute | Core PCE | Core CPI |
|---|---|---|
| Publisher | BEA | BLS |
| Release timing | Late in the month | Around mid-month |
| Coverage | Broader (includes 3rd-party spending) | Out-of-pocket only |
| Weighting | Chain-weighted (substitution) | Fixed basket (Laspeyres style) |
| Housing weight | ~15% | ~33% |
| 2022 peak YoY | 5.6% (Sep 2022) | 6.6% (Sep 2022) |
| Typical gap | 0.3-0.5 pp lower | 0.3-0.5 pp higher |
| Fed target | Main trend gauge (2% goal is on headline PCE) | None (referenced) |
Trader takeaway
- Direction over level. Core PCE trending down toward target is dovish-Fed regardless of absolute level. Core PCE trending up away from target is hawkish-Fed.
- Three-month annualised vs YoY. Bond traders often look at the 3-month annualised rate to spot inflection earlier than the noisier YoY series. A 3-month rate well below the 12-month rate signals disinflation is accelerating.
- Supercore PCE. Powell highlights "supercore PCE" (core services ex-housing) as the residual sticky-inflation component. Watch this for the late-cycle disinflation read.
- AUD/USD positioning. Pre-PCE volatility is lower than pre-CPI because CPI already provided most of the information. But surprises (rare, given the predictable input from CPI) can still move AUD/USD.
Methodology
- Source. Computed locally from FRED series PCEPILFE (Core PCE price index, monthly seasonally adjusted).
- Formula. YoY% = (PCEPILFE this month / PCEPILFE same month prior year - 1) × 100.
- Earliest valid datapoint. January 1960, 12 months after the PCEPILFE series starts in January 1959.
- Recession shading. NBER-dated US recessions from 2001 onwards (2001, 2007-09, 2020). Earlier recessions are not shaded.
- Refresh cadence. An automated cloud refresh pulls the series from FRED twice a day (07:30 and 13:30 Sydney time) and the site rebuilds when the data changes. If FRED is unreachable, the last good data is kept.
Related tools
- CPI Inflation YoY - the higher-frequency headline gauge.
- CPI Level - cumulative inflation view.
- Fed Funds Rate - the policy response variable.
- M2 YoY % - the upstream monetary driver.
- 10Y Treasury Yield - inflation expectations priced in bonds.
Frequently asked questions
Core PCE is the Personal Consumption Expenditures price index excluding food and energy components. It is published monthly by the Bureau of Economic Analysis as part of the Personal Income and Outlays release. The Fed's 2 percent inflation goal, set in January 2012, is defined on headline PCE; core PCE is the measure the Fed watches most closely for the underlying trend. The 'core' adjustment excludes the most volatile components (food + energy) to reveal underlying inflation pressure. FRED series ID is PCEPILFE.
Four reasons the Fed has given: (1) PCE has broader scope (covers all consumption including healthcare paid for by employer plans and government programs, where CPI only covers out-of-pocket consumer spending); (2) PCE has a chain-weighted formula that adjusts for substitution between goods (when chicken gets cheap relative to beef, consumers buy more chicken); (3) PCE is less affected by housing methodology, which dominates CPI; (4) PCE data has been historically less volatile and easier to forecast. Net effect: Core PCE typically runs 0.3-0.5 percentage points below Core CPI, reflecting these methodological differences.
Monthly, late in the month at 8:30 ET, as part of the BEA's Personal Income and Outlays release. Each release covers the previous month (the release at the end of September 2026 covers August). Core PCE comes out roughly two weeks after the CPI report for the same month, so CPI is the release the market reacts to first. PCE is the data the Fed itself flags as definitive.
Through the Fed reaction function. When Core PCE runs above 2 percent, the Fed has hawkish bias; when it runs below 2 percent for extended periods, dovish bias. The Fed's published Summary of Economic Projections (SEP) every quarter forecasts the Core PCE path explicitly. AUD/USD positioning around month-end PCE prints typically reflects the prior CPI print's direction; large PCE surprises (rare) can extend the move.
On current BEA data, core PCE YoY peaked at 5.6 percent in September 2022, well below the 9.1 percent headline CPI peak in June 2022 but still the highest core PCE reading since early 1983. The gap between core PCE and headline CPI in 2022 came mainly from the energy shock (Russia-Ukraine) and food inflation that core PCE excludes. Core PCE then eased to about 2.6 percent by April 2025 before turning back up to the 3 to 3.5 percent range in 2026. The latest reading is 3.01 percent for August 2026.
No. The 2 percent target is symmetric, meaning the Fed cares equally about inflation 1 percentage point above vs below the target. The Fed cuts when (a) Core PCE is trending below 2 percent OR (b) the labour market is weakening enough that the dual mandate (price stability + maximum employment) requires accommodation. The September 2024 first cut happened with core PCE running a little under 3 percent, because labour-market data had softened and the Fed wanted to ease before unemployment rose further. This is consistent with the framework even though the headline number was above target.
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