Yahoo Finance’s Jennifer Schonberger joins the Live show to discuss August CPE data.

Video Transcript

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BRAD SMITH: And we've also got some economic data that came out this morning. The Personal Consumption Expenditures, or PCE as you note in your hood, price index, that coming in at a hotter than expected, up 3/10 of a percent month-over-month. 6.2% year-over-year. Core PCE also pretty hot, up 4.9% year-over-year. And then you've got 6/10 of a percent month-over-month move.

Let's bring in Yahoo! Finance's Jennifer Schonberger, who is going to break this all down for us. Jennifer, what do we need to know about this?

JENNIFER SCHONBERGER: Hey there. Good morning, Brad. That's right, the Fed's preferred measure of inflation, the Personal Consumption Expenditures Price Index, as you mentioned, coming in pretty hot again for August. Just to reiterate some of those numbers, the headline number coming in at 6.2%. That's down slightly from 6.4% in July.

But if you break that down a bit, prices for goods increased 8.6%, prices for services up 5%, food up 12.4%, and energy prices up nearly 25% in August.

If we take out the volatile food and energy categories, look at that so-called core PCE, that clocked in at 4.9%. That was actually a bit hotter than the 4.7% seen in July. On a monthly basis, that would be up 6/10 of a percent.

So this definitely likely to keep the Fed on its toes, raising rates to rein in inflation. And speaking of inflation, looking across the pond this morning, the European Union reporting major price increases over there.

Consumer prices up 10% in the month of September. That is a record since they started keeping records back in 1997. That's two years before the euro even came into being. This, of course, likely to prompt both the Fed and the European Central Bank to raise rates again, guys.

BRIAN SOZZI: Jen, it's certainly also going to keep investors on their toes to kick off that fourth quarter. But we're also getting commentary from Fed Governor Lael Brainard. What is she saying so far?

JENNIFER SCHONBERGER: Yeah, absolutely, Brian. Fed Governor Lael Brainard speaking right now actually in New York, reiterating that monetary policy will need to be restrictive for some time to ensure inflation is coming down. And underscoring that the Fed is committed to avoiding pulling back prematurely.

Now, her comments coming in a speech focused on how raising rates and shrinking the balance sheet can actually have spillover effects for the rest of the world and vise versa. Brainard noted that the Fed is closely watching the potential for any spillover effects from global central banks raising rates and the risks of financial stability there.

Brainard actually pointed to European Central banks-- European banks, rather, that used up their capital buffers during the pandemic and have yet to replenish that, as a potential point for vulnerability. Now, I do want to underscore this, coming as the UK has seen some turmoil in its government bonds over there, and having to reverse course, and restart QE.

But this speech has actually been on the books for the past week for Brainard. So these comments have been planned. So investors should really take that in stride. But anyway, again, Lael Brainard underscoring that the Fed is committed to restrictive monetary policy, which makes sense in the face of these hotter PCE reads this morning.

BRIAN SOZZI: Jennifer Schonberger, thanks so much.