United States: PCE Inflation forecast and Fed stance – TD Securities

TD Securities economists Eli Nir and Oscar Munoz lower their September core PCE forecast to 0.32% month-on-month and headline PCE to 0.49% after weaker PCE-relevant components in PPI. They still see inflation as high for the Federal Reserve, expect core and headline PCE year-on-year at 3.1% and 3.6%, and anticipate the FOMC delaying any rate hike until December.

TD trims PCE but sees Fed hiking

"Our core PCE forecast was originally 0.36% with headline at 0.53% after the upside surprise in September CPI."

"PCE-relevant components of PPI were on net weaker than we had expected, resulting in a lower forecast. We now expect core PCE for September to print at 0.32% m/m with the headline at 0.49%. This is still uncomfortably high for the Fed, but we believe it prefers to wait until December for another hike."

"Our market-based core PCE forecast is still strong at 0.34% m/m, reflecting a pickup in underlying inflation."

"Our y/y PCE forecast stands at 3.1% for core and 3.6% for headline."

"We continue to expect the FOMC to skip October in favor of a December hike. Despite inflation printing stronger, key officials appear hesitant to rush to add more tightening, opting instead for less "urgency.""