The Federal Reserve’s preferred inflation gauge, the core PCE price index, climbed 3.1% year-over-year in September, matching economist estimates. This marks a slight uptick from August's 3% reading. On a monthly basis, core prices rose 0.3%, also in-line with forecasts.
The headline index rose 3.6% year-over-year, matching economist estimates, and rose 0.5% on a monthly basis, which was also right in-line with estimates.
Understanding the PCE Price Index
Personal consumption expenditures (PCE) track the actual spending habits (personal consumption) of domestic consumers. The headline number includes all categories, capturing the immediate "sticker shock" felt by households at the pump and grocery store. Core PCE excludes food and energy, making it less volatile than the headline PCE and thus provides a clearer view of long-term inflation trends.
The adjacent thumbnail gives us a close-up of the trend in YoY core PCE since January 2012. The first string of red data points highlights the 12 consecutive months when core PCE hovered in a narrow range around its interim low. The second string highlights the lower range from late 2014 through 2015. Core PCE shifted higher in 2016 with a decline in 2017, 2019, and 2020, with a major jump in 2022.
