Personal Consumption Expenditures Price Index

The Personal Consumption Expenditures Price Index measures the prices households pay for goods and services, drawing on business-survey source data compiled by the US Bureau of Economic Analysis as part of the National Income and Product Accounts rather than the household-survey methodology behind the CPI, and it updates its expenditure weights continuously to reflect how consumers substitute among goods as relative prices change. The Federal Reserve has designated the PCE price index, and particularly its core measure excluding volatile food and energy prices, as its preferred inflation gauge and the basis for its 2 percent long-run inflation target, a preference stated explicitly since 2000 partly because the PCE index tends to run somewhat lower and less volatile than the CPI.