PCE Cools in August

PCE sends rates lower, but only momentarily. This morning’s PCE, personal income, and personal spending figures were generally as expected, though rates fell 3-5bps across the curve immediately after the release. Much of the move was offset throughout the afternoon, however, and rates ended little changed. Elsewhere, NY Fed President Williams headlined after he suggested that the hiking cycle may have hit its end, though he said that rates should stay elevated for “some time.”

Core PCE rises by the slowest pace since late 2020. MoM, core PCE climbed 0.1%, below analyst estimates and below last month’s 0.2% gain. YoY, core PCE growth also slowed. Based on today’s data, some have pointed out that the Fed’s inflation projections from last week’s FOMC meeting may have been too high.

The week ahead. Next week’s slate will begin with a speech from Chair Powell on Monday, while 2023 policy voters Harker, Barr, and Williams will follow with separate commentary. Nonfarm payrolls and unemployment rate figures (Friday) will headline data releases, and both are expected to decrease in September from August. August’s figures were mixed, as nonfarm payrolls was well above the 170k forecast at 187k and the unemployment rate rose to 3.8% despite a 3.5% estimate.