Core PCE Inflation Cools Further in January

The BEA's Personal Income and Outlays report revealed inflation cooled further in January. Core PCE, the Fed's favored measure of inflation, was up 0.4% from December and slowed to 2.8% year-over-year, the lowest reading since March 2021 and one step closer to the Fed's 2% target rate. The latest headline PCE price index rose 0.3% month-over-month (MoM) and fell to 2.4% year-over-year (YoY), the lowest level since February 2021. All readings were consistent with their respective forecasts.

PCE Price Index

Personal consumption expenditures (PCE) measures and tracks changes for all domestic personal consumption. Core PCE measures the changes in personal consumption less food and energy, making it less volatile than the headline PCE. The PCE Price Index is calculated using PCE data and is a key way to measure changes in purchasing trends and inflation.