May 13, 2022 18:12 GMT
The underlying components of April's CPI and PPI reports point to a core PCE reading for the month of 0.2-0.3% M/M, by most estimates we've seen (for more on April's price dynamics, see our Inflation Insight).
- That would mean 3 consecutive months of 0.3% M/M core PCE - and on the lower end of prevailing estimates, anything below 0.24% M/M would be the slowest gain since Feb 2021. That could make the May 27 PCE release a little more interesting than usual.
- PCE is the Fed's preferred gauge of price pressures and Powell cited core PCE specifically at the May press conference in terms of evidence that they were "making some progress" on disinflation.
- While there's still one more CPI release before the June FOMC (May's reading on June 10), that is in the blackout period and so we won't get any Fed commentary on it before the decision. A soft PCE reading could help tip the scales against a bigger-than-50bp hike even if the CPI reading comes in a little above expectations.
Source: BEA, MNI
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