US Core PCE Preview: Forecasts from seven major banks

Markets expect core PCE inflation, which excludes volatile food and energy prices, to rise 0.3% on a monthly basis and forecast the annual rate to decline to 4.4% from 4.7% in November. If the awaited reading meets the said estimates, it would be the lowest since October 2021 but still more than twice as much as the Federal Reserve’s 2% target.

The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure (Core PCE), will be published on Friday, January 27 at 13:30 GMT and as markets await the key data for clues and direction. Forecasts by seven major banks commented on Friday’s data as follows:

Wells Fargo

“Our expectation for the PCE deflator is to remain unchanged.”

ING

“We expect the Fed’s favoured measure of inflation to show a relatively benign 0.2% MoM reading, which would confirm the easing trend in price pressures.”

CIBC

“Core PCE inflation, the Fed’s preferred measure of prices, likely eased to 4.4% YoY.”

NBF

“Still in December, the annual core PCE deflator may have moved down from 4.7% to a 14-month low of 4.4%.”

Deutsche Bank

“We don’t expect the same declines as recently seen in CPI as some of the stronger components in PPI last week are better correlated to PCE components. We expect a +0.4% monthly gain.”

Citibank

“Even throughout the last quarter of softer core CPI prints, we still expect core PCE to rise at a 4.0% annualized pace, still twice the Fed’s 2% target.”

TDS

“Core PCE prices likely accelerated to a 0.3% MoM pace in Dec, though a 0.4% gain can’t be discarded. The YoY rate likely slowed to 4.5%, suggesting prices continue to moderate but remain sticky at high levels.”