The core PCE estimate moved into focus after the latest US CPI report, with early forecasts ranging from 0.16% to 0.23% for monthly core PCE.
The source article said traders watch core PCE because the measure differs from a simple CPI conversion. It said the BEA builds PCE from a mix of CPI, PPI and other data. As a result, the CPI report alone does not give a full picture.
Pantheon shared one of the early calls. It put the core PCE estimate at a 0.16% rise for the month. If that happens, the annual rate would ease to 3.2% from 3.3%, according to the article.
Core PCE Estimate Still Needs PPI
However, the article said Thursday’s PPI report will fill in key missing parts. It pointed in particular to health-care and financial-service components. Therefore, traders still lack some of the data needed for a firmer read on core PCE.
The article said estimates now cluster around a 0.2% monthly increase in core PCE. That reading would support the view that inflation is cooling gradually. It would also give the Fed room to leave rates unchanged in September, the article said.
Key Data Due Before September Meeting
Meanwhile, the article stressed that there is still a long gap before the next Fed meeting on September 16. Before then, the US jobs report will arrive on September 4. In addition, PPI is due on September 10 and CPI will follow on September 11.
Because of that schedule, the article argued that current forecasts may not settle the September decision. It said more key data will still arrive before policymakers meet. Therefore, even if current estimates look good enough to support no change, the final picture may stay unclear until the September 11 CPI release.
The article also noted that headline and core PCE remain above the 2% target.
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Source: InvestingLive
