Bankinter | The US PCE Private Consumption Deflator (February) was published last Friday with the following results: up 2.5% year-on-year versus the 2.5% expected and previous. Core PCE up 2.8% year-on-year against the 2.7% expected and previous (revised up from 2.6%).
Personal Income (February): up 0.8% month-on-month compared to the 0.4% expected and the 0.7% previous (revised from 0.9%).
Personal Expenditure: up 0.4% month-on-month versus 0.5% expected and a drop of 0.3% previous (revised from -0.2%).
Bankinter Research Team’s View: The rebound in core PCE, the Fed’s preferred price measure, is in line with the University of Michigan’s Friday update of one-year (5.0% revised from 4.9%) and five-year (4.1% revised from 3.9%) inflation expectations. Consumers are cautious in a context of high uncertainty. In February, consumption growth was lower than expected. Adjusted for inflation, household spending rose by just 0.1%. Tariffs and their probable impact on prices increase the incentive for families to save. Negative data that reinforces the arguments for the Fed to move more slowly in the process of cutting rates. We expect two more cuts of 25 bp this year, to 3.75%/4.00%.
