The Bureau of Economic Analysis (BEA) reported October Personal Consumption Expenditures (PCE) inflation at 2.4% on 26 November, down from 2.6% in September. Core PCE — which excludes food and energy and is the Federal Reserve's preferred inflation gauge — fell to 2.2%, its lowest reading since February 2021.
Why PCE matters more than CPI for the Fed
The Fed targets PCE, not CPI. The two measures differ in three important ways: PCE covers a broader set of spending (including healthcare paid by employers and government); PCE uses a chain-weighted basket that adjusts as consumers substitute goods; and PCE gives less weight to shelter than CPI. As a result, PCE typically runs 0.3–0.5 percentage points below CPI. With CPI at 3.2% in October and PCE at 2.4%, the gap is 0.8 points — wider than average, largely because CPI's heavy shelter weighting (34%) is still running at 4.9%. The BEA's PCE data page and the FRED PCE series provide the full history.
The supercore signal
The most closely watched sub-component is "PCE services ex-housing and energy" — sometimes called "supercore PCE". It fell to 3.1% in October, from 3.4% in September. This component tracks domestic labour costs most directly and is the Fed's final obstacle to declaring victory on inflation. The FOMC meets on 16–17 December. Fed Chair Powell's remarks at the November press conference indicated that further "modest progress" on core PCE would be sufficient to justify a cut.