US: Upside risk for PCE inflation - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the US PCE deflator is due tomorrow and the market expects the core PCE (less food and energy) to remains steady at 1.7%. 

Key Quotes

“However, the CPI data for January released earlier in the month rose more than expected, and alternative core measures of CPI and PCE are showing evidence of a rising trend.”

“The Cleveland Fed trimmed mean CPI rose sharply in the last two months from 2.03 to 2.24% in Jan, a new high since 2012.  The Cleveland Fed median CPI was at 2.52 in Jan, averaging above 2.50 since August last year (well above the Fed’s 2% target). The Dallas Fed’s trimmed mean measure of inflation, based on 12 months of data was 1.85% in Dec, a high since 2012.”

“The Fed has said that is a residual seasonal bias in the CPI and PCE that tends to make inflation readings higher in the first six months of the year. This appears to be born out in the Atlanta Fed 6mth annualized trimmed mean PCE data shown in the chart above that peaked in June-2016.  It picked up again in December 2016 (even though lows for this series have tended to be in December in earlier years).”