Personal consumption expenditures price index

The Personal Consumption Expenditures (PCE) Price Index is a measure of inflation in the United States that tracks the changes in prices paid by consumers for goods and services. It is produced by the Bureau of Economic Analysis (BEA) and is based on data collected from a variety of sources, including surveys of consumers and businesses.

The PCE Price Index is considered to be a more comprehensive measure of inflation than other indices, such as the Consumer Price Index (CPI), because it takes into account changes in consumer spending patterns over time. Specifically, the PCE Price Index uses a formula that adjusts for changes in the quantities and types of goods and services that consumers buy, whereas the CPI uses a fixed basket of goods and services.

The PCE Price Index has two main components: the PCE Price Index for Goods and the PCE Price Index for Services. The Goods index includes items such as food, clothing, and automobiles, while the Services index includes items such as healthcare, housing, and transportation.

The PCE Price Index is closely watched by policymakers at the Federal Reserve, who use it to guide their decisions on monetary policy, including setting interest rates. Generally, when the PCE Price Index rises, it is a sign of inflation, and the Federal Reserve may respond by raising interest rates to help keep inflation under control. Conversely, if the PCE Price Index falls, it may indicate deflation, and the Federal Reserve may lower interest rates to stimulate economic growth.