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03 28 2016 | by Victor Xing | Economics

February PCE: inflation cools following prior rise

February PCE

February PCE (Personal Consumption Expenditures) surprised on the downside as Core PCE came in at 0.149% MoM vs. 0.2% consensus.  Instead of a single catalyst that weighed on the index, the cooling of price growth in February was seen across major constituents with energy goods and services declined near recent lows in January 2015.

This retreat would bolster Fed Chair Yellen’s “watchful waiting” policy stance, which was originally articulated by Governor Brainard on February 3rd.  This contributed to the dovish surprise at the March FOMC, when the Fed Chair expressed her cautiousness at the press conference despite firmer inflation readings:

Core inflation which excludes energy and food prices has also picked up, although it remains to be seen if this firming will be sustained.

During the press conference Q&A, the Chair Yellen also dismissed some of the firmness in February CPI and attributed the rise to “categories that tend to be quite volatile”

We did take note in this statement of the fact that inflation has picked up in recent months. I see some of that as having to do with unusually high inflation readings in categories that tend to be quite volatile, without very much significance for inflation over time

Month-over-month basis

  • Headline PCE: -0.106% MoM vs. -0.1% consensus and 0.112% prior
  • Core PCE: 0.149% MoM vs. 0.2% expectations and 0.270% prior
  • Energy goods and services: -6.420% MoM vs. -2.922% prior
  • Services at 0.133% MoM vs. 0.285% prior
  • Durable goods at -0.263% MoM vs. 0.105% prior
  • Goods at -0.618% MoM vs. -0.257% prior
February PCE
February PCE surprised on the downside with price growth in major sub-components cooled vs. January

Year-over-year basis

  • Headline PCE: 0.964% YoY vs. 1.241% prior
  • Core PCE: 1.677% YoY vs. 1.659% prior
  • Energy goods and services: -12.279% YoY vs. -5.250% prior
  • Services: 2.133% YoY vs. 2.097% prior
  • Durable Goods: -1.489% YoY vs. -1.056% prior
  • Goods: -1.452% YoY vs. -0.531% prior
February PCE
Core and services PCE hold steady on a year-over-year basis as goods and energy dip

Markets await Yellen’s speech

Fed Chair Yellen will speak on Tuesday at 11:30am ET, and market participants are expecting a possible update of assessments of recent data (including the latest PCE) as well as further clarifications on policy stance communicated at the March FOMC.

Next article03 16 2016 | by Victor Xing | Central Banks

March FOMC: cautiousness despite rising inflation