On Thursday morning, the US government released its September PCE report. If you have never heard of PCE, don’t worry. It is simply the inflation number the Federal Reserve cares about most, and September’s reading came in hotter than August’s. This post explains what PCE is, what the numbers say, and what they mean for the dollar, in plain English.
What is PCE?
PCE stands for Personal Consumption Expenditures. The idea is simple: the report tracks how much more (or less) you pay today for the same basket of things you bought before. Rent, food, petrol, doctor visits, phone plans. If the number goes up, prices are rising. That is inflation.
You may know CPI, the other famous inflation number. They are cousins. CPI is the one that makes the headlines. PCE is the one the Fed has chosen as its official yardstick, and its 2% inflation goal is measured against PCE. So when PCE moves, Fed members pay attention.
The numbers
| September 2026 | Month on month | Year on year | August, year on year |
|---|---|---|---|
| Headline PCE (everything) | +0.5% | 3.6% | 3.4% |
| Core PCE (without food and energy) | +0.3% | 3.1% | 3.0% |
“Month on month” compares September with August. “Year on year” compares September with the same month last year. Core leaves out food and energy because their prices jump around a lot. It is the cleaner clue about where inflation is heading. The Fed’s goal is 2%, so both numbers are still well above it.
For comparison, September CPI was 3.7% year on year. The two gauges tell the same story: inflation is still too high.
What pushed prices up?
Energy did a lot of the work. Of the $113.1 billion increase in what Americans spent in September, $45.7 billion was gasoline and other energy goods. That is the biggest single piece. Transport services added $18.4 billion, housing and utilities $17.8 billion and food services and hotels $15.5 billion. Spending on cars and car parts fell by $14.0 billion.
That fits with what Chair Warsh said yesterday: energy and related prices have moved higher again, and the Fed’s job is to make sure that does not spread across the economy.
The hidden part: people are getting squeezed
| Measure (after inflation) | August | September |
|---|---|---|
| Spending on goods and services | +0.5% | 0.0% |
| Disposable income (money left after tax) | 0.0% | −0.3% |
Americans spent 0.5% more money in September, but after you take out higher prices, they bought about the same amount as before. Their income after tax and after inflation also fell 0.3%. The saving rate is 3.8%, which is low. In plain words: households are paying more to buy the same things. That is why inflation hurts even when the economy looks strong, and it is also why some people worry about growth slowing later.
What it means for the Fed and the dollar
- It supports the hike case. The Fed held on Wednesday but two members voted for a hike, and the market already prices a hike on December 8–9 at 80.3%. A hotter PCE gives those members more to point to.
- Higher expected rates tend to support the dollar. If traders believe the Fed will keep rates high or raise them, the 2-year yield tends to rise and the dollar tends to firm. Our yields guide explains why.
- It does not change our score. PCE is not one of the ten drivers of the DXY Bias Score, so the score stays at +5. The inflation drivers in the score are CPI and PPI. PCE is context, and it points the same way as the CME driver that is already counting. You can read how the score got to +5.
We do not have the forecast figures for this release, so we are not calling it a “beat” or a “miss”. The clear facts are that both PCE numbers rose compared with August and both are above the Fed’s 2% goal.
What to watch next
- ECB decision, 13:15 GMT today. It matters for EURUSD, which is the biggest part of the dollar index.
- Bank of Japan, early Friday. It matters for USDJPY.
- COT report, Friday October 30. It updates the positioning driver.
- Jobs report, November 6, and CPI on November 10. These are the next big tests for the Fed’s December decision.
- Next PCE report, November 25, which covers October.
A safe plan for beginners
- Do not chase the first spike. Big data and central bank days bring wide spreads and fast moves.
- Wait for a candle close on the 1-hour chart before deciding.
- Check that DXY, EURUSD and GBPUSD agree. If one does not, stay out of that pair.
- Keep your size small and use a stop loss. Our notional value guide shows how to size a trade.
The risks
- PCE numbers are revised later. The earlier months can change.
- One inflation report is not a trend. Look at the next CPI and jobs report before drawing conclusions.
- Trading forex and CFDs carries a high risk of loss. This is education, not a trade recommendation or financial advice.
Where the numbers come from
All figures come from the US Bureau of Economic Analysis release “Personal Income and Outlays, September 2026”, published October 29, 2026. The Fed meeting is covered in our Fed decision post. The PCE panel is also in our Macro Tracker.