Core PCE Inflation Continued to Cool in February

The BEA's Personal Income and Outlays report revealed inflation continued to cool in February. Core PCE, the Fed's favored measure of inflation, was up 0.3% from January 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. Both readings were consistent with their respective forecasts.

The latest headline PCE price index rose 0.3% month-over-month (MoM), lower than the 0.4% expected growth, and was up 2.5% year-over-year (YoY).

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.