CPI vs PCE Inflation — The Fed's 2% Goal Is Set in PCE, and Why the Two Numbers Differ

As of 10 October 2026 (KST); BEA Personal Income and Outlays, August 2026 (released September 30, 2026), the BLS Consumer Price Index release for August 2026 (released September 11, 2026) and the FOMC Statement on Longer-Run Goals (reaffirmed effective January 27, 2026). Primary sources: https://www.bea.gov/news/2026/personal-income-and-outlays-august-2026, https://www.bls.gov/news.release/archives/cpi_09112026.htm and https://www.federalreserve.gov/monetarypolicy/files/FOMC_LongerRunGoals.pdf^[1][6]

Comparison basis: BEA compares each month with the preceding month and with the same month one year earlier. July 2026 values are as shown in the August release, which incorporates the annual update of the National Economic Accounts (revisions back to January 2021). Rates are rounded to one decimal place as published; the percentage-point changes are this page's calculations. BLS reports CPI 12-month changes before seasonal adjustment and monthly changes on a seasonally adjusted basis; July CPI values are as published in the July release and repeated in the August release.^{[1][2][9][10]}

In three lines 1. The FOMC states its 2% inflation goal in terms of the PCE price index, not the CPI. 2. BEA groups the gap between the two into formula, weight, scope and other effects: PCE covers spending by and on behalf of the personal sector, including households and nonprofit institutions serving households, while the CPI covers out-of-pocket spending by households. 3. In August 2026 CPI and PCE inflation were both 3.4% from a year earlier; core CPI was 2.4% and core PCE 3.0%.^[1][3][6][9]

CPI (Consumer Price Index for All Urban Consumers): prepared by the Bureau of Labor Statistics (BLS). PCE price index: the personal consumption expenditures chain-type price index prepared by the Bureau of Economic Analysis (BEA). The 2007 BEA article says the two "have different purposes and uses. Thus, they are constructed differently and tend to behave differently over time."^[5]

Core PCE: BEA defines the "core" PCE price index as PCE prices excluding food and energy prices.^[4]

Monthly vs 12-month change: BEA reports the change from the preceding month and from the same month one year ago; the Fed's goal refers to the annual change.^[1]

The FOMC's Statement on Longer-Run Goals and Monetary Policy Strategy says that "inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory maximum employment and price stability mandates". The statement was adopted effective January 24, 2012, and reaffirmed effective January 27, 2026.^[6]

The statement itself does not explain why PCE rather than the CPI was chosen; this page does not add a reason the FOMC has not given in it.^[6]

Scope example (medical care): "For example, medical care services in the CPI consist only of those services directly purchased by consumers." "In the PCE price index, medical care services include services directly purchased by consumers and services paid for on behalf of consumers", such as care paid for by employers through health insurance and by governments through Medicare and Medicaid.^[5]

Weight example (shelter): "The relative weight for rent of shelter in the CPI is consistently and significantly higher than its relative weight in the PCE price index." In the 2007 article's data, the weight was about 32 percent in the CPI and about 15 percent in the PCE price index.^[5]

A worked reconciliation: BEA's FAQ gives the third quarter of 2006 as an example, when the PCE price index rose 3.0 percent (annual rate) and the CPI 3.7 percent; BEA publishes the full reconciliation as Table 9.1U, "Comparison of the PCE Price Index with the CPI".^[3]

The Fed's measure vs the most-quoted measure. The FOMC's 2% goal is defined with the PCE price index; the CPI is the BLS measure of out-of-pocket prices paid by urban consumers. Quoting a CPI reading as 'the Fed's inflation measure' mixes the two (this page's reading).^[5][6]

Headline vs core. In August 2026 the PCE price index rose 3.4% from a year earlier and the core index, which excludes food and energy, 3.0%.^[1][4]

Staff estimate vs published figure. The September 15–16 FOMC minutes record a staff estimate, based on consumer and producer price data, of 3.8 percent for August PCE inflation, or 3.6 percent under BEA's new methodology; BEA's published August figure, released September 30, was 3.4 percent. The sources do not break down the difference between the estimate and the published figure (this page's comparison).^[1][8]

CPI vs PCE, August 2026. Headline 12-month inflation was the same in both measures: CPI 3.4% and PCE 3.4%, a gap of 0.0 pp, as in July (3.4% and 3.4%). Core measures differed: core PCE 3.0% versus core CPI 2.4% in August, 0.6 pp higher, after 3.0% versus 2.5% (0.5 pp) in July. These gaps are this page's calculation; the releases do not break them down by cause.^{[1][2][9][10]}

Same prices, different baskets. Formula, weight and scope differences mean the two indexes can diverge even when individual prices are the same (BEA's description of the effects).^[3]

BEA publishes the PCE price index monthly in Personal Income and Outlays; the September 2026 report is scheduled for October 29, 2026, at 8:30 a.m. EDT. BLS publishes the CPI; its release for September 2026 is scheduled for Wednesday, October 14, 2026, at 8:30 a.m. (ET).^[1][7][9]