Five years of inflation will be rewritten on Wednesday: in 14 of the last 16 annual updates, core inflation was higher than first reported

Executive Summary

• On Wednesday 30 September at 12:30 GMT, two reports will be released in a single document. The first is the August reading of the Personal Consumption Expenditures (PCE) Price Index, which measures changes in the prices of goods and services consumed by individuals and is the gauge targeted by the Federal Reserve. The second is the Annual Update of the National Economic Accounts, which re-estimates every month from Q1 2021 through Q1 2026, according to the US Bureau of Economic Analysis (BEA).
• The record points in one direction. We reviewed 16 annual updates from 2010 to 2025 in the historical releases archive (ALFRED). In 14 of them, prior-year core inflation, which excludes food and energy, was revised up, and only twice was it revised down. This rate measures the change in prices between Q4 of the preceding year and Q4 of the year being measured. The average revision was +0.10 percentage points, with the largest at +0.25 in the 2023 update.
• Prices move by tenths; savings move by full points. The average revision to core inflation for the latest published month was just 0.07 percentage points. By contrast, the Personal Saving Rate—the share of disposable income remaining after spending—changed by an average of 1.2 percentage points for the latest month, with its largest revision reaching +3.6 points in 2018. The currently published rate is 3.0%.
• The Federal Reserve’s gauge exceeds CPI by the widest margin since 1983. In July, core PCE inflation was 3.34%, against 2.47% for the Consumer Price Index (CPI), which measures changes in the prices of a basket of goods and services purchased by consumers, based on our calculations using seasonally adjusted indices. The +0.88 percentage-point gap is the widest since October 1983. Its average from 2000 to 2019 was −0.28. One of the main reasons is a category almost absent from CPI: prices for financial services and insurance rose 7.55% year on year.
• Consensus Estimates, which aggregate analysts’ forecasts, in our economic calendar are for core inflation of 0.3% month on month and 3.4% year on year, while Headline Inflation, which includes food and energy, is expected to rise 0.4% monthly and 3.8% annually. The Federal Reserve’s own September forecast—3.4% for core inflation in 2026—requires about 0.23% a month from August through December. A 0.3% reading is above that path. Moreover, the baseline underlying this calculation will itself be re-estimated on Wednesday.