PCE is the Personal Consumption Expenditures Price Index, an important measure of inflation that the Fed (Federal Reserve) uses to assess the changes in the prices of goods and services that American consumers spend on.
Highlights of the PCE index:
PCE measures the price volatility of goods & services that individuals consume in the U.S. over a specific period.
Considered a more standardized tool than CPI (Consumer Price Index) because PCE reflects actual consumption and has a broader scope.
The Fed uses PCE as a primary indicator to monitor inflation and adjust monetary policy:
If PCE rises, the Fed may maintain or raise interest rates to control inflation.
If PCE is low or decreases, the Fed may cut interest rates to stimulate the economy.
Whenever PCE is announced (usually monthly), the financial and cryptocurrency markets react strongly as investors adjust their expectations regarding interest rate policy.
