🇺🇸Cable FX Macro Weekly Note: U.S. Feb. Core PCE Deflator

**As seen in Risk In The Week report 03/24/23, subscribe at cablefxm.co.uk/reports

January Core PCE deflator rebounded as the index posted a 4.7% Y/y rise vs the prior 4.4%, the December figure was revised higher to 4.6%. The release came to beat the consensus median of 4.3%, however, we have seen economists estimates undershoot Core PCE for some time now. On the month, the figure printed at 0.6% vs the consensus of 0.4% and a prior 0.4%. Despite the rebound, the broad acceleration remains below levels seen during last year, the 3-month rate of rise is now 1.2%, off the 1.4% seen for most part of last year. If prices here continue to accelerate then we could go back to the prior pace, this seems unlikely given calendar effects and the fact that other inflation indicators seem to be cooling down. We just received a fresh batch of projections from the Fed, they revised their Core PCE 2023 forecast higher to 3.6% from a prior 3.5%, the 2024 metric is now seen at 2.6% vs the prior 2.5%, meaning the Fed does not see inflation falling back to target over the next couple of years. The desk at CIBC says that while the pace of the Core PCE deflator is still ‘hot’ for the likes of the Fed, it is worth recognizing that we have made progress even before any signs of cooling down from the labour market.