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Seven Wall Street estimates point to 0.32% core PCE for September, up from 0.25% in August.
A hot ppi reading has Wall Street lifting its estimates for September’s core PCE and warning of renewed rate risks. Seven estimates gathered by the report point to a 0.32% monthly rise in core PCE, up from 0.25% in August, after producer prices ran hotter than expected.
The report said the Producer Price Index rose 1.3% on the month, the biggest gain since March 2022 and more than double the 0.6% consensus, pushing the annual increase to 6.3%, the largest since December 2022. Gasoline prices rose 20%, but even excluding food, energy and trade services, prices still rose 0.5%, indicating breadth beyond energy, according to the report.
Economists use CPI and PPI to infer PCE because producer and consumer prices are linked through costs passed along the supply chain. Set against August’s 0.25% core PCE, 0.32% is about 28% faster (0.32% against 0.25%). The report added that a 0.32% monthly gain would lift year-over-year core PCE to 3.1% from 3.01%. Estimates ranged from 0.29% at Oxford Economics to 0.35% at Barclays.
Some economists see policy risk skewed toward another hike. “We see real risks the Fed will deliver another rate hike in two weeks’ time even as recent Fedspeak tempered expectations for back-to-back increases,’’ wrote Kathy Bostjancic, chief economist at Nationwide. Mizuho’s Alex Pelle wrote, “The picture is not benign with inflation elevated and intensifying… On the economic data alone, there is little reason for the Fed to hesitate to continue moving the policy rate higher.”
Market pricing is less decisive about the near term. Fed futures on Thursday showed a 29% probability of a hike at the end-of-month meeting, but a 91% probability of at least one hike by December, the report said. That is roughly 3.1 times higher odds for a move by December than for the immediate meeting (91% against 29%).
The forecasts are not the official PCE print and could change when the release arrives later this month. The next decision point the report cites is the Fed meeting at the end of this month, with futures assigning lower odds to action there than to a move by December.
Source: CNBC.
This article was written with AI assistance and reviewed by an editor.
This content is for informational purposes only and does not constitute financial advice.
🧠 HafidWatch Take
The divergence between economists’ hawkish outlook and the more cautious market pricing highlights how sensitive future rate expectations are to upcoming inflation data. Should the actual core PCE reading come in notably lower than the 0.32% forecast, it could prompt markets to reduce the odds of hikes by December, tempering the currently elevated policy risks. Conversely, a hotter-than-expected print would likely reinforce calls for tightening, pushing futures pricing even higher. This dynamic underscores that market expectations remain highly contingent on the imminent inflation figures rather than fixed in place.
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