🇺🇸Cable FX Macro Weekly Note: March Core PCE Deflator

**As seen in Risk In The Week report 04/21/23, subscribe at cablefxm.co.uk/reports

The February Core PCE Index eased to 4.6% Y/y from a prior 4.7%, this was slightly lower than expectations of 4.7%. The month-over-month figure rose by 0.3%, this was slower than the prior 0.5%, January got a downward revision from 0.6%. Despite the easing, the Core PCE Deflator 3- month rate is now ticking up at 1.2%, the fastest since October. The Fed sees the inflation gauge slowing down to 3.6% this year and to 2.6% by 2024, the latest SEP does not expect inflation to fall back to target over the forecast horizon. Analysts at Morgan Stanley said that Fed rate projections are now technically unchanged from December, the desk still expects the Fed to deliver a 25bps rate hike in May. Morgan Stanley sees rates peaking at 5.1% and the Fed holding before cutting in 1Q 2024. From a strategic point of view, BofA warned that the 10-year yield tends to trend lower after the Fed’s last rate hike, while the curve is likely to steepen, they recommend being long duration post Fed tightening period.