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PCE Sees Modest Dovish Reaction In Fed Pricing, ~35bp Of ’24 Cuts Priced

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Some contained dovish moves in FOMC-dated OIS in the wake of the PCE data, with the core PCE M/M reading printing pretty much bang in line with sell-side estimates in unrounded terms.

  • The slowing of the supercore measures appear to be the driver of the initial dovish market reaction.
  • Furthermore, the personal spending measures were on the soft side of expectations.
  • The data did not provide a hawkish surprise, much the same as April’s CPI reading.
  • The data isn’t viewed as a gamechanger for the Fed, with many policymakers already noting that they need to see a few months of better inflation outcomes before cutting rates.
  • Market pricing of the Fed’s policy rate path still sits at the hawkish end of the recent range.
  • FOMC-dated OIS moves to price ~35bp of cuts through year-end vs. 33bp ahead of the data.
  • Further forwards, 15bp of cuts are priced through the Sep FOMC vs. 14bp ahead of the data.
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Some contained dovish moves in FOMC-dated OIS in the wake of the PCE data, with the core PCE M/M reading printing pretty much bang in line with sell-side estimates in unrounded terms.

  • The slowing of the supercore measures appear to be the driver of the initial dovish market reaction.
  • Furthermore, the personal spending measures were on the soft side of expectations.
  • The data did not provide a hawkish surprise, much the same as April’s CPI reading.
  • The data isn’t viewed as a gamechanger for the Fed, with many policymakers already noting that they need to see a few months of better inflation outcomes before cutting rates.
  • Market pricing of the Fed’s policy rate path still sits at the hawkish end of the recent range.
  • FOMC-dated OIS moves to price ~35bp of cuts through year-end vs. 33bp ahead of the data.
  • Further forwards, 15bp of cuts are priced through the Sep FOMC vs. 14bp ahead of the data.