US Core PCE Preview: Forecasts from four major banks, inflation to stay elevated in April

The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure (Core PCE), will be released by the US Bureau of Economic Analysis on Friday, May 26 at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of four major banks.

Core PCE is expected to stay at 4.6% year-on-year while rising 0.3% in April (MoM). The headline is seen increasing by 0.4% in April, and a slowdown in the annual rate from 4.2% to 3.9%. 

TDS

“We expect core PCE inflation to tick a tenth higher to 0.4% MoM in April, matching the core CPI's MoM gain though there's a non-negligible chance it prints 0.3% (our unrounded forecast is 0.37%). The YoY rate likely rose a tenth to 4.7%.”

NBF

“In April, the annual core PCE deflator may have remained unchanged at 4.6%.” 

CIBC

“With the PCE price index weighting medical care services (a disinflationary force) higher than the CPI basket, but housing (an inflationary force) lower, the monthly seasonally adjusted increase in core PCE should be at least a tick weaker than ex food/energy CPI. However, that would leave the annual rate only one tick lower than in the previous month, at 4.5%.”

Citi

“Core PCE inflation should remain persistently strong in April, with expectations for a 0.38% MoM increase based on elements of CPI and PPI inflation. While this is a similar increase to 0.41% MoM core PCI, the key core non-shelter services price components may rise by a stronger 0.42% MoM in PCE compared to 0.11% in CPI which should highlight the divergence between CPI and PCE inflation. Our forecasts would imply core PCE inflation rising slightly to 4.7% YoY, although this will also be sensitive to any revisions to PCE data in the second release of Q1 GDP.”