Personal Consumption Expenditures Price Index (PCE)

Definition

A U.S. measure of changes in the prices of goods and services households consume, including purchases made on their behalf.

The index covers items households buy directly and some costs paid by employers or governments on their behalf, such as health care. Its weights reflect shifts in spending patterns. The Federal Reserve uses this measure to assess inflation against its longer-run goal.

Example

The PCE price index rises from 120 to 123 over one year. That is 2.5% PCE inflation.