Implications for US PCE chain-weighted price measures

While market participants focus more on US BLS' CPI report than the late-month release of chain-weighted personal consumption expenditure (PCE) inflation measures, monetary policymakers couch their inflation objectives in terms of the latter series. 

Sans projected movements in food and energy costs during the reference period, the core PCE chain-price index is expected to have edged one tick higher for a fifth straight month. 

"Running the seasonally adjusted CPI forecasts through PCE inflation models, the latter's headline measure is expected to dip by 0.1% in September, the first decline since January", says Societe Generale. 

These projections, if accurate, would leave the headline and core PCE deflators 0.1% and 1.3% above their respective year-ago levels, both still well shy of the FOMC's stated 2% objective. 

"Mimicking their corresponding CPI barometers, the gap between the annual growth rates of the total and core PCE inflation gauges since last fall likely will continue over coming months and may not close in a meaningful way until the final quarter of 2016", states Societe Generale.