Scotiabank said PCE is the Fed's preferred inflation indicator, especially the core PCE, which excludes food and energy prices. PCE data for March will be released next Friday. Looking back at the latest US CPI report released last week, the core CPI monthly rate in March remained at a hot level of 0.4%, and the seasonally adjusted annual rate (SAAR) was 4.7%. It should be noted that due to differences in various measurement methods, the core PCE does not always keep pace with the core CPI (as shown in the figure).
However, the PCE data is unlikely to deviate from the Fed's expectations of a 25 basis point rate hike at the May 4th meeting in Beijing time. Scotiabank believes that the Fed will raise interest rates as scheduled at the May meeting, and Chairman Powell will discuss the terminal interest rate level at the June meeting. The bank does not expect Powell to explicitly say that he is done (the rate hike cycle) at the May meeting, even if this is indeed the last rate hike. He has to manage the market as part of all this, and an "all clear" signal may lead to another shock, which they do not want to see at this time. Therefore, the wise thing to do is to issue a short statement that is almost identical to the last one, saying that they are somewhat encouraged by the calmness of the entire bank market, and then say see you in June, when a new round of forecasts and a new dot plot will be provided.