Core PCE Preview: Forecasts from six major banks, hovering around elevated levels

The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure (Core PCE), will be published on Friday, October 28 at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of six major banks.

The market expectation is for the monthly core PCE inflation to rise by 0.5% in September following August’s 0.6% increase. On a yearly basis, the PCE inflation and the core PCE inflation, which excludes volatile food and energy prices, are forecast to rise to 5.8% and 5.2%, respectively. 

ING

“The core personal consumer expenditure deflator is expected to broadly match what happened to core CPI so we look for the annual rate to rise to 5.2% from 4.9%. With the economy growing and inflation heading in the wrong direction, the Fed cannot slow the pace of hikes just yet.”

NBF

“Still in September, the annual core PCE deflator may have moved up from 4.9% to a five-month high of 5.1%.”

BBH

“Consensus sees 5.2% YoY vs. 4.9% in August. If so, it would be the second straight month of acceleration to the highest since March. Shelter is likely to post another big rise, similar to what we saw in the September CPI data. Of note, shelter makes up around 16% of the PCE basket vs. nearly 33% of the CPI basket. In September, the shelter component in CPI rose 0.7% MoM and 6.6% YoY, with the YoY rate the highest since August 1982. We believe another big rise in core PCE this week would shatter the market’s recent complacency in a big way.”

Citibank

“Core PCE MoM – Citi: 0.4%, prior: 0.6%; Core PCE YoY – Citi: 5.1%, prior: 4.9%. Despite a strong 0.6% MoM increase in core CPI in September, we expect a more modest 0.4% increase in core PCE inflation based on elements of CPI and PPI. Strong shelter prices that helped offset weakness in goods prices in CPI will receive a smaller weight in PCE inflation.

TDS

“We expect core PCE inflation to have eased from a super-strong 0.6% MoM in Aug to a still-strong 0.4% MoM in Sep.”

Danske Bank

“We expect an unchanged high MoM 0.6% increase in the US PCE core index, which leaves core inflation at 5.3% in September, up from 4.9% in August.”