CPI and PCE Inflation Reports: What They Measure and Why

CPI and PCE

CPI and PCE are the main US inflation measures. Learn how they differ, headline vs core, supercore, release timing and how traders react to inflation surprises.

Intermediate3 min readUpdated 3 Oct 2026

Lesson 3 of 17

The Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) price index are the two main measures of US consumer inflation. CPI is released earlier each month and gets more market attention; PCE is the measure the Federal Reserve uses for its 2% inflation target. Both report headline inflation and core inflation, which excludes food and energy. In periods when inflation drives interest rate expectations, CPI release days can be among the most volatile days of the month for stocks, bonds and currencies.

CPI vs PCE#

	CPI	PCE price index
Published by	Bureau of Labor Statistics (BLS)	Bureau of Economic Analysis (BEA)
Timing	Around the 10th to 15th of the month, for the previous month	Late in the month, about two weeks after CPI
Scope	Out of pocket spending by urban consumers	All consumer spending, including spending on behalf of households (such as employer health insurance)
Weights	Fixed basket, updated annually	Adjusts more for changes in spending patterns
Housing weight	Larger (about a third of CPI through shelter)	Smaller
Typical level	Usually runs a few tenths of a point higher than PCE	Fed's target measure

Because many PCE components come from CPI and PPI data, economists can estimate PCE closely once CPI and PPI are out.

Headline, core and supercore#

Measure	Definition	Why watched
Headline	All items	What consumers experience
Core	Excludes food and energy	Underlying trend; less volatile
Supercore	Core services excluding housing	Watched by the Fed as a gauge of wage driven inflation

Inflation is reported month over month and year over year. Traders often focus on the monthly core change, because it shows the latest trend.

Annualising monthly inflation#

annualised rate = (1 + monthly change)^12 - 1

A 0.2% monthly rate annualises to about 2.4%; 0.3% to about 3.7%; 0.5% to about 6.2%.

Shelter and lags#

Shelter (housing costs) is the largest component of core CPI. It is measured through rents and owners' equivalent rent, which change slowly because leases reset over time. Market rents can turn well before CPI shelter does, so economists often look at private rent indices to anticipate CPI trends.

How markets use inflation data#

Market	Reaction to higher than expected inflation
Short term bond yields	Rise, as rate cut expectations fall
Dollar	Often strengthens
Stocks	Often fall, especially growth stocks
Gold	Mixed; depends on real yields
Rate futures	Reprice the expected path of Fed policy

See Interest Rates and The Federal Reserve and the FOMC.

Other inflation data#

Producer Price Index (PPI): prices received by producers, released around CPI.
Import prices.
Average hourly earnings: wage growth from the jobs report. See Employment Data and Non-Farm Payrolls.
University of Michigan inflation expectations: consumers' views. See Consumer Confidence.

Trading around CPI#

Know the consensus for headline and core.
Reduce risk into the release unless trading it deliberately.
Watch the details: shelter, services and goods.
Expect volatility in rates, currencies and indices at 8:30 a.m. Eastern.

Frequently asked questions#

What is the difference between CPI and PCE?#

CPI measures prices paid out of pocket by urban consumers and is released earlier; PCE covers broader spending and is the Federal Reserve's preferred inflation measure.

What is core inflation?#

Inflation excluding food and energy prices, used to judge underlying trends.

Why do markets react so strongly to CPI?#

Because inflation surprises change expectations for interest rates, which affect bond yields, currencies and stock valuations.

Next, learn about the jobs report in Employment Data and Non-Farm Payrolls.

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Next lessonEmployment Data and Non-Farm PayrollsThe US jobs report includes non farm payrolls, unemployment and wage growth. Learn what each number means, release timing, revisions and how markets react.