Weekly Signal & Noise Filter
It’s a Growth AND Disinflation Story, and Nothing Has Changed
At first glance, the information surface appears to have changed, from a disinflationary trajectory to a reflationary one. There is even crazy talk about policy rate hikes coming from the usual quarters of the commentariat (that have been wrong this entire cycle, it should be pointed out).
In the February 11th edition of this note, both upside and downside core PCE tails for January were considered, with the upside tail being less impactful on the policy trajectory than a downside one.
With March off the table, a downside tail could potentially put it back in play.
While an upside tail would add noise to the picture, the Fed’s preferred YoY inflation gauge would remain intact to the downside and possibly kick the rate cut can out by 1-month from May to June.
June is where it’s at now. That is not a shock, and its ok.
The PPI release raised the likelihood of an upside core PCE tail, and that the hot January/February seasonal pattern of 2022 and 2023 is on repeat for the rest of Q1.
Pinebrook’s preliminary core PCE estimate was thus raised from .25% MoM to .39% MoM, resulting in 3m, 6m, and YoY run rates of 2.76%, 2.53%, and 2.88%, respectively.