📝Core PCE Pace Would Cool From 5.4% to 4.4%: Westpac Strategy

• According to San Fran Fed calculations the cyclical component of the core PCE accounts for just over 2ppts of the 5.4% core PCE pace (see right panel, slide four), while the “acyclical” component - everything else unrelated to demand conditions - accounts for the 3.5ppts balance.

• A slowing in the cyclical component of the core PCE from near 6% to around 3% roughly trims it’s contribution to the overall core PCE in half, to around 1ppt. All other things equal - admiteddly a big call - that would mean the overall core PCE pace would cool from 5.4% to 4.4%. That would still leave it above the Fed’s 2022 year end central tendency forecast of 4.1%, but at the very least moving in the right direction. - Westpac Strategy