The Bureau of Economic Analysis is slated to unveil the Federal Reserve’s favored gauge of inflation, the Personal Consumption Expenditure (PCE) index for September, at 8:30 a.m. ET on Friday.
This data holds immense significance as it not only serves as the primary inflation metric closely watched by the Fed but also stands as the pivotal economic information preceding the Federal Reserve Open Market Committee meeting scheduled for Oct.31 and Nov.1 next week.
September PCE Report: What Are Economists Expecting?
Here’s what economists are forecasting for the September PCE Report:
- The headline PCE price index is expected to rise from August’s 3.5% year-on-year increase to a 3.4% year-on-year jump in September.
- On a monthly basis, the headline PCE price index is projected to show a 0.3% increase month-over-month, slightly decelerating from the prior 0.4% rise.
- The core PCE price index (excluding energy and food) is forecasted to ease from 3.9% year-on-year to a 3.7% year-on-year increase in September.
- The monthly increase in the core PCE price index is expected to accelerate from 0.1% to 0.3%
| PCE Price Index | Sept. est. (y/y) | Aug. (y/y) | Sept. est. (m/m) | Aug. (m/m) |
|---|---|---|---|---|
| Headline | 3.4% | 3.5% | 0.3% | 0.4% |
| Core (Excluding Energy and Food) | 3.7% | 3.9% | 0.3% | 0.1% |
In September, another closely monitored inflation measure, the Consumer Price Index (CPI), indicated a 3.7% annual increase, surpassing analysts’ expectations of 3.6%.
Meanwhile, the core CPI, which excludes energy and food prices, dipped from August’s 4.3% year-over-year to 4.1% in September, aligning with the anticipated 4.1%.
How These 5 Popular ETFs Could React To September’s PCE Report
The market isn’t expecting the Federal Reserve to raise interest rates once more, and expectations for the future fed funds rate seem to have settled at the current 5.25%-5.50% range.
According to CME Group‘s Fedwatch Tool, the market currently assigns a 98% probability to the Fed keeping rates unchanged in the upcoming meeting next week and a 75% probability of the same outcome in December.
However, should the PCE report surprise with higher figures, the market could begin to factor in a greater likelihood of the Fed implementing another rate hike in December.
Now, let’s take a look at how these 5 popular ETFs have responded to previous inflation reports:
| ETF | Sept. CPI report (1-day %chg.) | Aug. PCE Report (1-day %chg.) | Aug. CPI report (1-day %chg.) |
| SPDR S&P 500 ETF Trust SPY | -0.61% | -0.29% | +0.12% |
| Invesco QQQ Trust QQQ | -0.35% | +0.07% | +0.38% |
| iShares 20+ Year Treasury ETF TLT | -2.71% | +0.01% | -0.02% |
| SPDR Gold Trust GLD | -0.30% | -1.03% | -0.23% |
| Invesco DB USD Index Bullish Fund ETF UUP | +0.84% | +0.07% | +0.07% |
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