US Core PCE Price Index YoY (%)
Broader markets are looking for a respite today, and if they are to continue, they will need the next major US inflation indicator to play its part. So far, risk trades are feeling some relief today after a tough week. But can they hold out until the end of the week?
The US PCE price index is expected to come in at +0.1% MoM for both the headline and core estimates. Meanwhile, the annualized reading is expected to come in at +2.5% for both the headline and core estimates as well. However, Goldman Sachs claims that we could see the core reading at +0.2% MoM and +2.6% YoY with the latter figure remaining unchanged from May.
At the moment, the narrative suggests that the US deflationary process is ongoing. However, it is moving at a fairly gradual pace. And under current conditions, there may be bumps along the way as policymakers anticipate as well.
So, even with today’s core annualized reading of 2.6%, it’s not a major setback for the Fed.
But with markets in such a tense state this week, any reading higher than that could easily alarm investors. All the early gains we are seeing in equity and risk markets could be at risk before the weekend.