# 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. Source: https://learn.tradelabsai.com/macro/cpi-and-pce/ Track: Economics and Macro · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "CPI and PCE", https://learn.tradelabsai.com/macro/cpi-and-pce/ 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. **Example: Reading a CPI report** Consensus expects core CPI to rise 0.3% month over month. The report shows 0.4%, with shelter and services prices strong. Annualised, 0.4% a month is about 4.9%, well above the Fed's goal. Within minutes, two year Treasury yields jump 15 basis points as traders reduce bets on rate cuts, the dollar rises and stock index futures fall 1.5%. A 0.1 point surprise in monthly core inflation can move markets significantly. See [News Trading](https://learn.tradelabsai.com/strategies/news-trading/). ## 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](https://learn.tradelabsai.com/macro/interest-rates/) and [The Federal Reserve and the FOMC](https://learn.tradelabsai.com/macro/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](https://learn.tradelabsai.com/macro/non-farm-payrolls/). - **University of Michigan inflation expectations:** consumers' views. See [Consumer Confidence](https://learn.tradelabsai.com/macro/consumer-confidence/). ## Trading around CPI 1. **Know the consensus** for headline and core. 2. **Reduce risk** into the release unless trading it deliberately. 3. **Watch the details:** shelter, services and goods. 4. **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](https://learn.tradelabsai.com/macro/non-farm-payrolls/). ## Continue learning - Next lesson: [Employment Data and Non-Farm Payrolls](https://learn.tradelabsai.com/macro/non-farm-payrolls/) - Previous lesson: [Inflation](https://learn.tradelabsai.com/macro/inflation/) - Related: [Inflation](https://learn.tradelabsai.com/macro/inflation/): Inflation is the rate at which prices rise over time. Learn its causes, how it is measured, how central banks respond and how it affects stocks, bonds and gold. - Related: [The Federal Reserve and the FOMC](https://learn.tradelabsai.com/macro/the-federal-reserve-and-the-fomc/): The Federal Reserve sets US monetary policy through the FOMC. Learn how meetings work, the dot plot, statements and press conferences, and how Fed days trade. - Related: [Trading Economic Releases](https://learn.tradelabsai.com/macro/trading-economic-releases/): Economic data releases cause sharp moves in rates, currencies and stocks. Learn the key US releases, how surprises are measured and how to manage the risk. - Related: [Interest Rates](https://learn.tradelabsai.com/macro/interest-rates/): Interest rates are the price of money and a key driver of asset prices. Learn policy vs market rates, real rates and how rates move stocks, bonds and currencies. - Related: [News Trading](https://learn.tradelabsai.com/strategies/news-trading/): News trading reacts to headlines and economic releases as they hit the market. Learn the approaches, why surprises matter, the speed problem and how to manage risk.