MBS Day Ahead: Why Chicago PMI is More Important Than PCE Inflation

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Posted To: MBS Commentary

Chicago PMI isn't always more important that PCE inflation. After all Core PCE is the Fed's favorite big-picture inflation reading (the thing they want to see at 2.0%) and inflation is one of the key motivations for hiking/cutting the Fed's policy rate. In fact, just yesterday, Powell told reporters that the only real reason the Fed would have to move the policy rate at this point would be a substantial change in inflation. Powell also told reporters the committee (that's the Federal Open Market Committee aka FOMC) doesn't see much of a chance of inflation increasing in a way that would require policy action. He even said that inflation expectations appear to be settling in under 2%. Here's the point: if the Fed is confident enough in the absence of inflation to share…(read more)

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