Final demand PPI increased by a bigger-than-expected 0.4% m/m, but the components that feed into the Fed’s preferred PCE price measure were, on the whole, very tame. As a result, we now estimate that core PCE increased by 0.30% m/m in January. Since prices increased by 0.51% m/m a year earlier, that would still be enough to bring the annual core PCE inflation rate down to 2.6%, from 2.8%. At the same time, however, it would also push the six-month annualised rate back up to 2.5%, from 2.3%. Headline PCE probably increased by 0.32% m/m.
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