US Core PCE: Banks Preview, inflation still too hot

The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure (Core PCE), will be released by the US Bureau of Economic Analysis on Friday, March 31 at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of seven major banks.

Core PCE is expected to stay at 4.7% year-on-year while rising 0.4% in February (MoM). The headline is seen increasing by 0.2% in February, and a slowdown in the annual rate from 5.4% to 5.3%. 

Deutsche Bank

“We see a +0.36% advance for the core PCE in February and MoM declines for both income (-0.1% vs +0.6% in January) and consumption (-0.6% vs +1.8%).”

CIBC

“The Fed’s preferred gauge of inflation, core PCE prices, likely decelerated to a 0.4% monthly pace, slightly slower than its CPI counterpart given the lower weight of shelter in the index, but still too hot to reach on-target inflation, and justifying the Fed’s decision to raise rates further in March. We are roughly in line with the consensus, which should limit any market reaction.”

Citi

“Core PCE inflation should rise 0.31% MoM in February based on details of CPI and PPI, a softer increase than in January but with core PCE YoY moderating only slightly to 4.6% and with risks of a print that remains at 4.7%. Some strong details of CPI will still be supportive of PCE inflation, including persistently strong shelter prices. Meanwhile, we continue to pencil in modestly stronger core PCE prints than CPI for much of this year due to the strength in key non-shelter services prices.”  

TDS

“We expect core PCE price inflation to slow down from a robust 0.6% MoM in Jan to a still-strong 0.4% in Feb (also below core CPI's 0.5% MoM gain). The YoY rate likely rose a tenth to 4.8%, suggesting the path to normalization in price gains will be bumpy. Conversely, personal spending likely fell, but that would follow an eye-popping 1.8% surge in the prior month.”

NBF

“The annual core PCE deflator may have stayed unchanged at 4.7%.”

Wells Fargo

“We forecast the PCE deflator (+0.4%) to outpace nominal spending (+0.3%).”

Credit Suisse

“We expect the monthly reading to just round down to 0.3%, leaving YoY core inflation unchanged at 4.7%. Monthly headline inflation should be similar to core, but the YoY measure should drop to 5.1% owing to an easy base effect.”