Fed's Preferred Inflation Measure Comes In Higher Than Expected: What You Need To Know

The SPDR S&P 500 ETF Trust SPY (NYSE: SPY) traded slightly higher on Friday morning after the Bureau of Economic Analysis reported a 6.2% increase in the personal consumption expenditures (PCE) price index in the month of August, remaining near the highest levels since the 1980s.

What Happened: The headline PCE rose 6.2% in August. That's down from 6.3% in July and a 2022 high of 6.8% in June.

The August PCE reading came in below economist estimates of 6.6%.

Core PCE, which excludes volatile food and energy prices and is the preferred inflation measure for the Federal Reserve, was up 4.9% in August, above economist estimates of a 4.6% gain.

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The latest CPI inflation reading comes after the Federal Reserve issued its third consecutive 0.75% interest rate hike earlier this month.

Bond market volatility ramped up starting last Friday when new U.K. Prime Minister Liz Truss announced a bold stimulus program that includes tax cuts and investment incentives.

The yield on 10-Year U.S. Treasury bonds also briefly topped 4% on Wednesday before dropping back down to 3.73% on Friday morning. The S&P 500 hit fresh 2022 lows this week as well on concerns inflation and rising interest rates will trigger a downturn in the U.S. economy.

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Earlier this month, the Labor Department reported The Consumer Price Index (CPI) was up 8.3% in August, down from a 2022 peak of 9.1% in June. The Labor Department also reported that U.S. wages grew just 5.2% year-over-year in August.