Ahead of the FOMC this month, analysts at Nomura noted that the Fed’s preferred measure, the PCE price index, was essentially unchanged (+0.032%) m-o-m in March, in line with the market consensus (0.0%) but slightly below our forecast of 0.063%. 

Key Quotes:

“On a 12-month basis, PCE prices rose 2.0% (2.014%) in March from 1.7% (1.731%) previously, matching expectations (Nomura: 2.046%, Consensus: 2.0%). Excluding food and energy, the core PCE price index, the FOMC’s preferred measure of the underlying inflation trend, rose by 0.2% (0.153%) m-o-m in March (Nomura: 0.191%, Consensus: 0.2%), translating into an increase of 1.9% (1.882%) on a y-o-y basis (Consensus: 1.9%, Nomura: 1.917%), up from 1.6% (1.571%) in February. 

Given on a 12-month basis, both overall inflation and core inflation reached or moved closer to 2%, the FOMC will likely reflect those developments into their post-meeting statement on Wednesday this week. The Committee might stress that, despite the large increases in the y-o-y metrics, incoming inflation data have been in line with its forecast as expressed in their latest Summary of Economic Projections (SEP) from March.”

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