Thoughts on PCE Core next week – another bump in the road?

asked by u/rossi_eva · 7d · 2 answers

Alright folks, another week, another data point to obsess over. With PCE Core coming up, I've been kicking around the probabilities for what we might see and, more importantly, what it means for the market's current love affair with rate cuts. The consensus seems to be penciling in a decent deceleration, but I'm not entirely convinced we're out of the woods.

My gut, and a quick glance at some of the stickier components we've seen lately, suggests there's a higher chance than the market's pricing in for PCE Core to come in a little hotter than anticipated – let's say, north of 0.3% MoM. I'd put that probability at around 40-45%. Why? Well, shelter inflation, while showing signs of cooling, still has a lagged effect, and some service sectors are proving remarkably resilient. If it does print hotter, prepare for the market to throw a mini-tantrum, likely pulling back some of those aggressive rate-cut bets for mid-year. If it aligns with or dips below consensus, it'll be business as usual, perhaps a slight relief rally, but nothing dramatic. The Fed's certainly watching this one closely, as are we all, hoping for a smooth ride rather than another inflationary pothole.

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Top answers

  • u/dcastro· 1 pts· 7d

    PCE is definitely the big one, but are you more concerned with the month-over-month or the year-over-year figure? A high MoM would certainly throw a wrench in things, regardless of the YoY trend.

  • u/wang_haru· 1 pts· 7d

    PCE Core could easily come in hot again, especially with energy prices picking up a bit. The market's pricing in cuts pretty aggressively, which feels like wishful thinking if inflation data keeps surprising to the upside.