Core CPI vs Core PCE
Core measures strip out food and energy — the two most volatile CPI and PCE components — to reveal the underlying inflation trend. Core PCE is the Fed's single most-watched inflation gauge.
CPILFESLPCEPILFE- Core CPI
- Core PCE
Stripping food and energy removes the short-run noise that can push headline inflation around without reflecting persistent price pressure. A summer oil spike or a frost-hit harvest hits headline numbers hard but doesn't signal durable inflation, so economists and policymakers watch core measures for the signal.
The differences between core CPI and core PCE mirror the differences between the headline indexes. Core PCE's healthcare weight is roughly double core CPI's; core CPI's shelter weight is roughly double core PCE's. The Fed explicitly targets 2% core PCE inflation. When the two measures tell different stories — as they did in 2023, with core CPI stubbornly elevated while core PCE cooled faster — the Fed weights core PCE more heavily because that is what its 2% rule book references.
Frequently asked questions
Why don't the Fed and the media focus on the same inflation measure?
Media outlets cover CPI because it is published first and is used for Social Security cost-of-living adjustments. The Fed targets PCE because its broader scope and chain-weighted methodology give what the FOMC considers a more reliable signal of underlying inflation.
How long has core PCE been the Fed's target?
The FOMC formally adopted a 2% inflation target defined in terms of PCE in January 2012, though the Fed had cited PCE as its preferred gauge for years before that.
Related comparisons
CPI vs PCE
CPI and PCE are the two main U.S. inflation gauges. They usually move together but measure different baskets with different weights — and the gap between them drives where the Fed sets policy.
CPI vs PPI
The Producer Price Index (PPI) measures prices received by domestic producers. Changes in PPI often show up in CPI several months later — making PPI a leading indicator of consumer inflation.
10-Year vs 2-Year Treasury Yield
When 2-year yields exceed 10-year yields the curve is inverted — and inversions have preceded every U.S. recession since 1955. Compare the two benchmark yields directly.
Fed Funds Rate vs 10-Year Treasury Yield
The federal funds rate is the Fed's lever on short-term interest rates; the 10-year Treasury yield is set by the bond market. Comparing them shows the market's read on Fed policy.
30-Year Mortgage vs 10-Year Treasury
The 30-year fixed mortgage rate closely tracks the 10-year Treasury yield plus a spread that reflects credit risk, prepayment risk, and mortgage-backed-security pricing.
U-3 vs U-6 Unemployment Rate
The headline U-3 rate counts only the jobless who are actively looking. U-6 also counts underemployed and marginally attached workers — a broader gauge of labor-market slack.