CPI vs. PCE Inflation

CPI and PCE are the two inflation measures Americans hear about most often. They both track changes in consumer prices, but they are built differently, so they can produce different inflation rates even when they are describing the same economy.

What CPI measures

The Bureau of Labor Statistics says the Consumer Price Index measures the average change over time in prices paid by urban consumers for a market basket of consumer goods and services. CPI is built from prices consumers face directly and is published for the U.S. and many geographic areas.

CPI is often used for cost-of-living adjustments, wage discussions, contracts, and household inflation analysis.

What PCE measures

The Bureau of Economic Analysis produces the Personal Consumption Expenditures price index. PCE is tied to the broader national accounts and measures prices of goods and services purchased by consumers or on their behalf. That broader scope can include spending paid by third parties, such as some health-care expenses.

Why the numbers differ

Different source data

CPI relies heavily on household-oriented price collection and consumer expenditure data. PCE draws heavily from business and administrative data used in the national accounts.

Different weights

The measures do not assign identical weights to every category. Housing tends to have a larger weight in CPI, while health-care spending paid on consumers’ behalf has a larger role in PCE.

Different formulas

PCE uses a chain-type approach that can reflect consumers shifting purchases among categories as relative prices change. CPI uses a different index framework and basket construction. The methodology difference is one reason PCE inflation can move differently from CPI.

Different scope

CPI focuses on out-of-pocket spending by urban consumers. PCE has broader coverage of household consumption, including certain expenditures made on behalf of households.

Headline vs. core versions

Both CPI and PCE are commonly reported in headline and core forms. Core measures exclude food and energy because those categories can be volatile. Core inflation can help analysts study underlying trends, but households still pay for food and energy, so headline inflation remains economically meaningful.

BLS reported core CPI inflation of 2.4% over the 12 months through August 2026. BEA reported core PCE inflation of 3.3% over the 12 months through July 2026.

Why the Federal Reserve focuses on PCE

The Federal Reserve states its longer-run inflation goal in terms of PCE inflation. PCE’s broader coverage and ability to reflect shifts in spending patterns are among the reasons it is useful for monetary-policy analysis.

That does not make CPI unimportant. CPI is highly relevant to households, contracts, benefits, and many real-wage comparisons.

Which measure should you use?

• Household price experience: CPI is often the more familiar starting point.
• Federal Reserve inflation discussions: PCE is usually the key measure.
• Real earnings: BLS commonly deflates earnings with CPI-based measures.
• Economic analysis: use both when the distinction matters.

Do not compare mismatched months

CPI is usually released before PCE for the same month. If the newest CPI is for August while the newest PCE is for July, comparing their 12-month rates without noting the reporting periods can create confusion. Always label the month and whether the figure is headline or core.

Continue learning

Read Inflation Explained, visit the Economy & Inflation hub, or use the Economic Data Center for primary releases.

Sources & methodology

• BLS — Consumer Price Index
• BLS — CPI, August 2026
• BEA — PCE Price Index
• BEA — Personal Income and Outlays, July 2026