Friday's PCE Readings Headline This Week's Release Schedule

Friday’s April PCE data (08:30 NY/13:30 London) dominates this week’s calendar.

• Core readings will be watched closely, as Fed watchers continue to monitor the size of the wedge to core CPI inflation.
• The wedge is provided by vehicle insurance premiums and other PCE-specific factors.
• Analyst estimates centre on a core PCE print of ~0.25% m/m, while the BBG survey median points to 0.3%.
• Any marginal downside surprise would probably provide less of a shock given the 2dp estimate flagged above.
• FOMC-dated OIS currently sit towards the hawkish end of recent ranges, with ~15bp of easing priced through the end of the Sep FOMC and ~35bp of cuts showing through year end.
• The first full 25bp cut is not fully discounted until the Dec meeting.
• Recent Fedspeak has turned more hawkish, with many officials becoming less optimistic when it comes to progress in the fight against inflation.
• Median expectation-matching outcomes would still leave core PCE running comfortably above the Fed’s target.
• Selected sell-side comments below:
• Bank of America: We expect headline and core PCE to print at +0.24% m/m. We take on board the signal from sticky services inflation and expect core PCE inflation to end the year at 2.9% y/y, little changed from December 2023. Headline PCE is expected to come in at 2.7% y/y at year-end.
• J.P.Morgan: The “supercore” price index appears likely to have risen 0.2% (0.24% unrounded) in April.
• Societe Generale: We look for headline PCE of 0.28% gain and for core PCE of 0.27%. While we do not forecast super core inflation, we suspect the increase will be slightly larger. Inflation is moderating in our view, but the pace is gradual.