What is Core PCE Price Index?
Core PCE Price Index m/m refers to the month-over-month change in the Core Personal Consumption Expenditures Price Index.
The Core PCE Price Index measures the prices that people in the United States pay for goods and services, excluding food and energy prices because these tend to be highly volatile. This index is used to track inflation by measuring changes in the prices of a basket of goods and services consumed by households.
m/m (month-over-month) refers to the change in the Core PCE Price Index from one month to the next, showing the amount by which prices have increased or decreased in a given month compared to the previous month.
Meaning of the percentage number
Positive percentage: indicates a price increase. For example, 0.2% means prices have increased by 0.2% compared to the previous month.
Negative percentage: indicates a price decrease (deflation). For example, -0.2% means prices have decreased by 0.2% compared to the previous month.
A zero percent: indicates that prices have not changed compared to the previous month.
The Fed uses this as the primary inflation measure of the Federal Reserve. Inflation is important for currency valuation because higher prices prompt the central bank to raise interest rates without waiting for directives to control inflation.
Impact on Gold & USD Dollar
Dollar strengthens, gold declines: If the Core PCE Price Index rises more than expected, it indicates higher inflation. The Federal Reserve may raise interest rates to control inflation. Higher interest rates attract foreign investors seeking better returns, increasing demand for the USD, which strengthens the dollar. As a result, gold may become less attractive at that time.
Dollar weakens, gold rises: If the Core PCE Price Index increases less than expected, it indicates lower inflation. The Federal Reserve may keep interest rates low. Lower interest rates make investing in the USD less attractive, causing the dollar to weaken. As a result, gold becomes a more preferred alternative for investors.
