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

The SPDR S&P 500 ETF Trust SPY SPY traded higher by 0.5% on Friday morning after the Bureau of Economic Analysis reported a 6.8% increase in the personal consumption expenditures price index in the month of June, the highest inflation reading in any month since 1982.

What Happened: The headline PCE rose 6.8% in June, up from 6.3% in May and exceeding the previous 2022 high of 6.6% in March. The June PCE reading came in above economist estimates of 6.7%.

Core PCE, which excludes volatile food and energy prices and is the preferred inflation measure for the Federal Reserve, was up 4.8% in June, above economist estimates of a 4.7% gain.

Related Link: Experts React To 0.75% Fed Rate Hike: 'Don't Think They Will Pause'

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

On Thursday, the Bureau of Economic Analysis reported U.S. GDP was down 0.9% in the second quarter, marking the second consecutive quarter of negative growth.

Many economists consider two consecutive quarters of GDP declines to be a recession, but Fed Chair Jerome Powell said Wednesday he does not believe the U.S. is in a recession because of the strength of the U.S labor market.

"While another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data we get between now and then," Powell said.

Related Link: Federal Reserve Issues Second Straight 0.75% Interest Rate Hike: The Important Signal It's Sending On Inflation

Earlier this month, the Labor Department reported an 8.6% increase in the consumer price index in June, the highest inflation reading in any month since 1981. The Labor Department also reported that U.S. wages grew just 5.2% year-over-year in May.

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