CPI and PCE are two distinct U.S. price gauges built by different agencies with different coverage and weighting methods, which is why they produce different inflation rates. The Federal Reserve has explicitly defined its longer-run 2% inflation goal against the PCE price index, a choice it formalized in 2012 after informally shifting away from CPI around 2000.
What Is the Consumer Price Index (CPI)?
The U.S. Bureau of Labor Statistics (BLS) defines the CPI as a measure of the average change over time in the prices paid by consumers for a representative basket of consumer goods and servicesCITE:E1.
What Is the Personal Consumption Expenditures (PCE) Price Index?
The U.S. Bureau of Economic Analysis (BEA) states that the PCE price index tracks the changing prices of goods and services purchased by consumers in the United StatesCITE:E2.
How Do CPI and PCE Differ in Coverage and Weighting?
The Federal Reserve Bank of Cleveland (Cleveland Fed) notes that the PCE price index has broader coverage than CPI because it includes spending made directly by households as well as spending made on behalf of householdsCITE:E5. The Cleveland Fed also points out that the two indexes draw on different data sources for their weights, with PCE weights updated more frequently to reflect changes in household spending patternsCITE:E6.
What Are the Distinct Purposes of CPI and PCE?
BEA explains that CPI and PCE each have their own purposes and uses, and because the two indexes are constructed differently, they produce different inflation ratesCITE:E7.
What Is the Federal Reserve's Inflation Target, and How Is It Measured?
The Federal Reserve defines its longer-run inflation goal as 2%, measured by the annual change in the price index for personal consumption expendituresCITE:E3.
When Did the Fed Formally Adopt PCE as Its Preferred Inflation Gauge?
The Federal Reserve Bank of Atlanta (Atlanta Fed) states that the Fed moved away from CPI informally around 2000 and officially adopted a longer-run target of 2% for PCE inflation beginning in 2012CITE:E4.
| Milestone | Detail |
|---|
| Informal shift away from CPI | Around 2000CITE:E4 |
| Official adoption of PCE-based target | 2012CITE:E4 |
| Fed's longer-run inflation target | 2%, measured by annual PCE price index changeCITE:E3 |
What this means: CPI (BLS) and PCE (BEA) both track consumer prices but are built differently — PCE has broader coverage of household-related spending and more frequently updated weights than CPICITE:E5CITE:E6 — which BEA confirms is why the two indexes yield different inflation ratesCITE:E7. Against that backdrop, the Federal Reserve's decision to define its 2% longer-run goal specifically in terms of PCE rather than CPICITE:E3, formalized in 2012 after an informal shift starting around 2000CITE:E4, ties the central bank's policy benchmark to the index BEA and the Cleveland Fed describe as the broader, more frequently reweighted of the two measuresCITE:E5CITE:E6.
Author's Take・EffectStory 編輯部
The CPI/PCE split is a methodology story, not a political one: the Fed's 2% target is explicitly written against the PCE price index, not the more commonly quoted CPI. That choice becomes more legible once you line up the two indexes' construction — the Cleveland Fed's own comparison shows PCE has broader coverage, including spending made on behalf of households, and its weights are updated more frequently than CPI's, which BEA confirms is enough on its own to produce different inflation rates from the same underlying economy. For anyone trying to gauge whether the Fed is near or away from its goal, the practical implication is to track the annual PCE price index change specifically, since that is the series the 2% target is defined against — not the CPI headline. The figure worth watching next is simply how that PCE reading trends relative to the 2% line the Fed formalized in 2012.