The PCE stands for Personal Consumption Expenditures.
It is a measure of the total amount of money spent by households on goods and services. The PCE is calculated by adding up the prices of all the goods and services purchased by households in a given period and adjusting for changes in quality and quantity.
The PCE is similar to the CPI (Consumer Price Index) in that it is used to measure inflation. However, the PCE is considered a more comprehensive measure of inflation because it takes into account changes in the composition of household spending over time. For example, if households switch from buying more expensive products to cheaper ones, the PCE will reflect this change, while the CPI may not.
The PCE is also used by the US Federal Reserve as its preferred measure of inflation when setting monetary policy. The Fed typically aims to keep inflation at around 2% per year, as measured by the PCE.
