The Fed’s preferred inflation indicator is out Friday. What to expect [Video]

Federal Reserve officials will get the latest look at their favorite inflation indicator Friday, a data snapshot that could influence the September rate decision even as policymakers appear to have their focus elsewhere these days.

The Commerce Department at 8:30 a.m. ET will release its personal consumption expenditures price index, a sprawling measure of what consumers are paying for a variety of goods and services as well as their spending preferences.

While the Fed uses a whole dashboard of indicators to measure inflation, the PCE index is its go-to data point and its sole forecasting tool when members release their quarterly projections. Policymakers especially hone in on the core PCE measure, which excludes food and energy, when making interest rate decisions.

The Fed prefers the PCE over the Labor Department’s consumer price index as the former takes into account changes in consumer behavior such as substituting purchases, and is broader.

For the July reading, …