In August 2026, US consumer prices were 3.4% higher than a year earlier. Excluding food and energy, they were 2.4% higher. Energy prices alone were up 16.3%, after oil jumped in the spring.
Those two numbers are headline and core inflation. Here is what each one measures, why core exists and which one the Federal Reserve watches.
What is core inflation? Core inflation is the rise in consumer prices, excluding food and energy. Headline inflation includes everything. Core excludes those two because their prices swing with harvests, weather, and oil markets.
In August 2026, headline CPI inflation was 3.4%. Core was 2.4%.
Since 2000, headline prices have moved about twice as much as core prices from month to month.
The Fed sets its 2% target on headline PCE inflation. Its forecasts also give core PCE.
Headline and core, on CPI and PCE
Inflation is the rise in the general level of prices over time. We explain its causes in What Is Inflation?
The US has two main price indexes. Each comes in a headline and a core version:
The consumer price index (CPI), from the Bureau of Labor Statistics. It prices a fixed basket of what households buy. We explain it in What Is CPI?
The PCE price index, from the Bureau of Economic Analysis. It covers a wider range of spending, including what is paid on households' behalf. We explain it in What Is PCE Inflation?
In both, core simply drops food and energy. In the CPI, those two made up 20.9% of the basket in July 2026.
Why leave out food and energy
Food and energy prices jump around. The average US petrol price rose 25% in March 2026 alone, measured month on month. In November 2008, it fell 30%. That noise can hide the trend in everything else.
Source: FRED (CPIAUCNS, CPILFENS); YX Insights
The chart shows both CPI measures since 2000. The headline line swings much more:
Headline ranged from −2.1% in July 2009 to 9.1% in June 2022.
Core ranged from 0.6% in October 2010 to 6.6% in September 2022.
Measured month to month, headline CPI has been 2.2 times as volatile as core since 2000.
Over long periods, the two end up close. Since 2000, headline CPI inflation has averaged 2.60% a year and core 2.41%.
When the gap opens
Source: FRED (CPIAUCNS, CPILFENS); YX Insights
The gap between the two is mostly an energy story:
July 2008: oil peaked. Headline was 5.6%, core 2.5%.
July 2009: oil had crashed. Headline was −2.1%, while core stayed at 1.5%.
June 2022: after Russia invaded Ukraine, headline ran 3.1 points above core.
May 2026: after the Hormuz crisis, headline was 4.2% and core 2.9%.
When energy pushes headline up, core shows whether price rises are spreading to rents, services and goods. When the two move together, the pressure is broad.
Which one the Fed watches
The Fed's 2% goal is written on headline inflation. Its statement on longer-run goals defines it as "the annual change in the price index for personal consumption expenditures." That is headline PCE.
The Fed's quarterly projections show core PCE alongside it. Core strips out the swings in food and energy, so it shows the trend more steadily.
In August 2026, headline PCE inflation was 3.4%. Core PCE was 3.0%. Both were above the 2% goal. The Fed raised rates on 16 September. We explain how higher rates work on inflation in Interest Rates and Inflation.
How to read both on CPI day
The next CPI report, for September 2026, is due on 14 October 2026 at 8:30am Eastern time. A few checks help:
Read core first for the trend. A monthly core rise of 0.3% works out at about 3.7% a year, well above the 2% goal.
Then check the gap. A big gap usually points to energy or food.
Look at oil. Petrol and heating costs follow crude prices. We explain those in How the Oil Market Works.
Headline inflation is what households pay. Core is the trend underneath. Read both. The gap tells you how much of the move is oil and food.
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