US March PCE core inflation 2.8% YoY versus 2.7% expected

• Prior 2.8% (unrevised to 2.8%)
• PCE Core YoY 2.8% vs 2.7% estimate
• PCE Core MoM 0.3% vs 0.3% estimate.
• Prior MoM +0.3% unrevised to 0.3%
• Headline PCE 2.7% vs 2.6% estimate
• Headline MoM PCE 0.3% vs 0.3% expected
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Consumer spending and consumer income for March:

• Personal income 0.5% vs 0.5% estimate. Prior month 0.3%.
• Personal consumption 0.8% vs 0.6% estimate. Prior month 0.8%
• Real personal spending 0.5% vs 0.5% last month (revised from 0.4%).

The core PCE rise was 0.32% out to 2 decimal places. So on the topside of 0.3%. This is better than was feared. Yesterday, the whispers were for a 0.4% and perhaps closer to 0.5%.

It looks like the higher PCE from yesterday”s GDP PCE was in January. January can be wonky due to end of year/beginning of year volatility. Having said that, the progress on inflation is stalled (see chart above). The Fed target is still down at 2.0% with some thinking if they got to 2.5% it would give them some ammunition to take out some of the restrictive monetary conditions.

The rate cut expectations is only marginally higher in September vs the 58% chance prior to the report.

US stocks moved higher initially (NASDAQ is up around 180 points), but have come off a bit. US yields are a few basis points lower:

• 2-year yield 4.974%, -2.5 basis points
• 5-year yield 4.681%, -3.5 basis points
• 10 year yield 4.658%, -4.7 basis points
• 30-year yield 4.768%, -5.2 basis points

That compares to start of the US session levels:

• 2-year yield 4.999%
• 5-year yield 4.708%
• 10-year yield 4.685%
• 30-year yield 4.791%

This article was written by Greg Michalowski at www.forexlive.com.