An inflation-heavy week has seen hawkish core PCE estimates emerge from downside surprises in core CPI and PPI measure
- An inflation-heavy week has seen hawkish core PCE estimates emerge from downside surprises in core CPI and PPI measures.
- Core PCE is tracking at circa 0.33% M/M, which if confirmed would be an eleven-month high and see both three- and six-month rates easily higher than the Y/Y again.
- U.Mich consumer inflation expectations surged further in March preliminary results, and with “Independent” respondents increasing more firmly rather than a further split by political bias seen in recent months.
- Elsewhere, labor indicators were solid, including latest weekly jobless claims and what’s admittedly a particularly lagged January JOLTS report with its later than usual release this month.
- Markets have shifted away from recent dovish extremes seen early in the week, and now eye a next Fed cut in July as part of 65bp of cumulative cuts for the year.
- Retail sales on Monday offers an early highlight before Wednesday’s FOMC decision. The Fed is expected to continue to exercise patience in policy setting, leaving the Fed funds target range on hold at 4.25-4.50% and making no changes to its formal rate guidance. The updated SEP should show higher inflation and weaker growth in 2025 compared with December's forecasts, in large part due to the impact of ongoing and expected future government policy shifts. The lack of conviction to resume the easing cycle comes in the context of significant government policy risks.
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