How Does PCE Affect Stocks & ETFs?

The Personal Consumption Expenditures Price Index is the Federal Reserve's preferred measure of inflation. Unlike CPI, PCE accounts for substitution effects (when consumers switch to cheaper alternatives) and covers a broader range of expenditures.

The Fed explicitly targets 2% PCE inflation. Core PCE is the number that matters most for monetary policy decisions. Persistent deviations from target directly shape the rate path, making this the most policy-relevant inflation reading.