Dallas Fed Paper: PCE Inflation to be Revised Higher

Here's a little red meat for the inflation and monetary policy junkies out there. Two economists at the Dallas Fed released a short paper yesterday entitled, "Getting a Jump of Inflation.”

I was hoping for something like an inflation jump to conclusions mat.But it’s even better than that. These guys totally buried the lede...they close with this (emphasis mine):

“The BEA estimated April 2017 PCE

inflation at 1.72 percent (as of August

2017) and June 2017 PCE inflation

at 1.42 percent. Based on Fed survey

results, it’s likely these figures will be

revised higher—to 1.90 percent and 1.55

percent, respectively—at the next annual

revision in summer 2018. Thus, the

economy may be closer to the Federal

Reserve’s definition of price stability

than is commonly believed.”

Take five minutes and read this thing--they describe how only a couple of high-frequency data points (the Fed aggregate prices paid index and to a lesser extent, ISM prices paid) predict inflation just as well as the second and third revisions of the PCE data set. Bottom line--these guys see underlying price pressures that aren’t yet showing up in the headline inflation data. Could be a sign that the market has gotten too complacent on Fed expectations, and the market is overextended in the usual suspects like short USD and breakevens.   

And commodities keep on truckin’

Copper is partyin’ like it’s 2012...the luxury shopping malls of East Santiago will soon again be teaming with shoppers spending new found loot. Wasn’t so long ago that $3/pound seemed like a cruel memory of a lost time to your average Chilean economist.

Woe be the trader that ignores the ides of September...or Jackson Hole!

Shawn
TeamMacroMan2@gmail.com
@EMInflationista