United States: PCE Inflation forecast and Fed stance – TD Securities

TD Securities economists Eli Nir and Oscar Munoz lower their September core PCE forecast to 0.32% month-on-month and headline PCE to 0.49% after weaker PCE-relevant components in PPI. They still see inflation as high for the Federal Reserve, expect core and headline PCE year-on-year at 3.1% and 3.6%, and anticipate the FOMC delaying any rate hike until December.

TD trims PCE but sees Fed hiking

"Our core PCE forecast was originally 0.36% with headline at 0.53% after the upside surprise in September CPI."

"PCE-relevant components of PPI were on net weaker than we had expected, resulting in a lower forecast. We now expect core PCE for September to print at 0.32% m/m with the headline at 0.49%. This is still uncomfortably high for the Fed, but we believe it prefers to wait until December for another hike."

"Our market-based core PCE forecast is still strong at 0.34% m/m, reflecting a pickup in underlying inflation."

"Our y/y PCE forecast stands at 3.1% for core and 3.6% for headline."

"We continue to expect the FOMC to skip October in favor of a December hike. Despite inflation printing stronger, key officials appear hesitant to rush to add more tightening, opting instead for less "urgency.""

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)