Core Personal Consumption Expenditures (Core PCE)
A variant of PCE excluding volatile food and energy prices to gauge underlying inflation trends, favored by the Fed for policy decisions.
What is Core Personal Consumption Expenditures (Core PCE)?
Core PCE strips out food (10% weight) and energy (4% weight) from the headline PCE, focusing on persistent price changes in areas like housing (18%) and healthcare (20%). In August 2025, core PCE rose 2.9% year-over-year, holding steady from July, with a 0.2% monthly gain, above the Fed’s 2% target. Calculations use BEA data, with recent drivers including a 4.1% shelter cost increase and 3.5% in medical services.
It provides a smoother signal for monetary policy; for instance, during 2022-2023 hikes, core PCE peaked at 5.6% before easing to 2.9% amid rate cuts starting September 2025. Trimmed mean PCE, another core variant from Dallas Fed, was 2.7% in August 2025, excluding extreme price changes for robustness. Median PCE from Cleveland Fed rose 0.2% monthly in August, annualizing to 3.2%, highlighting sticky inflation in the middle 50% of components.
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