US: No surprises on the inflation front - Nomura

Analysts at Nomura note that US core PCE inflation rose 0.2% (0.228%) in February, in line with expectations (Nomura: +0.233%, Consensus: +0.2%), following a 0.3% (0.288%) gain in January.

Key Quotes

“Its y-o-y change rate inched up to 1.6% (1.596%), in line with expectations (Nomura: +1.587%, Consensus: +1.6%), from 1.5% (1.529%) in January. The six-month annualized core PCE inflation accelerated further to 2.311%, from 2.067% in the previous month.”

“Including energy and food, headline PCE inflation was up 0.2% (0.190%) m-o-m, near expectations (Nomura: +0.201%, Consensus: +0.2%), but its 12-month change rate was 1.8% (1.754%), slightly above expectations (Nomura: +1.749%, Consensus: +1.7%).”

“There were no major surprises on the inflation front. In its communique after the recent meeting the FOMC stated that “inflation on a 12-month basis is expected to move up in coming months.” Consistent with the FOMC’s view, we are also expecting an increase of a couple of tenths in y-o-y core PCE inflation in the next few months because negative pressure from certain items (e.g., lower wireless telecom service prices) is likely to drop out of the calculation. Thus, it is possible to see 2% inflation in core PCE inflation in the near future.”

“GDP tracking update: Real PCE growth in February was in line with our expectation, but the BEA revised down January real PCE growth. Thus, we lowered our Q1 real GDP tracking estimate by 0.1pp to 1.7% q-o-q saar.”