April 10, 2026
Today’s core PCE release covered prices through February 2026. The Iran War began with February 28 airstrikes on Iran by the US and Israel; the latest release thus establishes a baseline before oil and natural gas prices began their upward climb.
The preferred 6 month percentage change in core PCE ticked up to 3.4% in February; the more commonly reported 12 month percentage change was 3.0%. My model suggests that the probability that underlying inflation has increased over the preceding 6 months is 81%. The report implies elevated price pressures before the Iran War started. We are a ways away from the Fed’s 2.0% long run target.
Annualized three month percentage changes in inflation were 4.4%, but I would ignore that figure: you can see how noisy the red dashed lines are above. Focus on the light green line, which best estimates the thick blue line showing underlying inflation, but only with a lag.
The graph above reports real time unrevised data, so that the probabilities in the lower portion are meaningful and comparable. There’s a break in the series for October 2025 due to the government shutdown, which is smoothed over above.
