What Is The Federal Reserve's Favorite Inflation Gauge? Does Fed Focus On CPI Or PCE?According to the Bureau of Economic Analysis' most recent report on personal incomes and expenses, consumer prices increased more than anticipated in August despite Federal Reserve efforts to slow price increases by raising interest rates. What is the Federal Reserve's favorite inflation gauge% decline 0. In July, the Personal Consumption Expenditures (PCE) Price Index for the BEA increased by 0.3% in August, exceeding the 0.1% forecast of economists.