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High Bar For Core PCE To Trigger Reaction

US DATA
The core deflator reading will as usual be a focal point in the Feb PCE report out at 0830ET/1330UK. The % M/M reading is seen slowing to 0.4% (survey range of 0.3 to 0.6%) vs 0.6% prior (Y/Y seen steady at 4.7%).
  • This M/M deceleration is seen in contrast to the mild acceleration in core CPI last month (+0.45% vs +0.41% in Jan), due to a few methodological factors, chiefly PCE's airfares metric falling 2.6% M/M (taken from the PPI report), vs CPI's +6.4%.
  • It would take a pretty outsized reading to trigger a market reaction though. PCE is even more "stale" than usual given recent banking events, and there will clearly be more weight placed on the Apr 28 PCE release just ahead of the May 3 FOMC.
  • A downside miss to core (allowing the Fed even more room to be cautious) on the order of 0.2% / surprising softness in ex-housing core services / weak personal spending numbers (vs +0.3% M/M survey) would probably be required.
  • May FOMC hike pricing currently prints at 15bp, with 55bp of cuts implied from then to year-end.
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