US Core PCE Bank Expectations: Fed preferred inflation measure sticking around

The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure (PCE), will be released by the US Bureau of Economic Analysis (BEA) on Friday, May 26 at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of four major banks.

Core PCE is expected to stay at 4.6% year-on-year while rising 0.3% in April (MoM). The headline is seen increasing by 0.4% in April, and a slowdown in the annual rate from 4.2% to 3.9%. 

TDS

“We expect core PCE inflation to tick a tenth higher to 0.4% MoM in April, matching the core CPI's MoM gain though there's a non-negligible chance it prints 0.3% (our unrounded forecast is 0.37%). The YoY rate likely rose a tenth to 4.7%.”

NBF

“In April, the annual core PCE deflator may have remained unchanged at 4.6%.” 

CIBC

“With the PCE price index weighting medical care services (a disinflationary force) higher than the CPI basket, but housing (an inflationary force) lower, the monthly seasonally adjusted increase in core PCE should be at least a tick weaker than ex food/energy CPI. However, that would leave the annual rate only one tick lower than in the previous month, at 4.5%.”

Citi

“Core PCE inflation should remain persistently strong in April, with expectations for a 0.38% MoM increase based on elements of CPI and PPI inflation. While this is a similar increase to 0.41% MoM core PCI, the key core non-shelter services price components may rise by a stronger 0.42% MoM in PCE compared to 0.11% in CPI which should highlight the divergence between CPI and PCE inflation. Our forecasts would imply core PCE inflation rising slightly to 4.7% YoY, although this will also be sensitive to any revisions to PCE data in the second release of Q1 GDP.”

About the Core Personal Consumption Expenditures Price Index

The Core Personal Consumption Expenditures released by the US Bureau of Economic Analysis is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products such as food and energy in order to capture an accurate calculation of the expenditure. It is a significant indicator of inflation. A high reading is bullish for the USD, while a low reading is bearish.