📝Expect Core PCE Deflator Rising 0.25% In April: Wells Fargo

Taking into account today's CPI data and the April Producer Price Index report, we estimate the core PCE deflator, the Fed's preferred inflation gauge, rose 0.25% in April. If realized, the core PCE index would subside from a three-month annualized rate of 4.4% in March to 3.4% in April. Relative to one year ago, we expect the core PCE deflator to remain at 2.8%. The smaller sequential increase in core PCE in April would be a step in the right direction for the Fed to regain some confidence that inflation is subsiding, but we believe it will take at least few more benign inflation readings for the FOMC to feel sufficiently confident to begin lowering the fed funds rate. We continue to look for the first rate cut from the FOMC to come at its September meeting, but any additional bumps in the road would likely push that timing back, absent a marked deterioration in the labor market. - Wells Fargo