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Press Release

One factor that kept PCE inflation elevated in 2023 and 2024: The stock market

09.23.2025

Many items in the personal consumption expenditures (PCE) price index are influenced by developments in the labor market, but some “non-market” items tend to move with the stock market – which helped keep overall PCE inflation elevated in recent years, according to new Cleveland Fed research.

Most components of PCE inflation are based on observed market prices. Those components were the main drivers of disinflation in 2023 and 2024, “coinciding with a gradual loosening in labor market conditions,” write the authors, Randal Verbrugge and Saeed Zaman.

But non-market components, which must be imputed, “showed far less deceleration over this timeframe, which has helped to keep overall PCE inflation elevated,” Verbrugge and Zaman write.

“This is because some of the components of the non-market-based category, mainly imputed financial services, are strongly correlated with stock market performance. Given strong stock market performance in 2023 and 2024, it is not surprising that non-market-based inflation remained elevated,” they write.

Read the Economic Commentary: Understanding Inflation via Developments in Market and Nonmarket Inflation Rates

More on inflation: The Center for Inflation Research

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Chuck Soder, chuck.soder@clev.frb.org, 216.672.2798

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