Macro — inflation
PCE inflation
PCE
What it is
The Personal Consumption Expenditures price index is the OFFICIAL inflation measure targeted by the Fed. Compared to CPI, it better weights substitutions between goods, gives more weight to healthcare, and less to housing.
How to read it
PCE is typically 0.3-0.5 pp below CPI. When Core PCE (ex food/energy) trends toward 2%, the Fed has met its mandate. The trajectory toward target matters more than the exact level.
Common reference points
- Target met~ 2%
- Slightly above2 – 3%
- Hawkish pressure3 – 5%
- Out of control> 5%
Orders of magnitude, not a rule: the same number does not mean the same thing from one sector to the next.
What it does not tell you
Published with a 1-month lag. Often revised. Core PCE is what really matters — not the headline that includes volatile food and energy.
Other measures — Macro — inflation
Educational content. Polaris is not a registered investment adviser and makes no recommendation.