Synopsis:

Both Goldman Sachs and Morgan Stanley expect a firm February core PCE inflation print, reinforcing recent themes of sticky inflation. While GS sees a more moderate 0.2% increase in their trimmed core measure, MS forecasts a hotter 0.35% m/m rise driven by goods and non-housing services. Headline PCE is expected to come in softer due to weaker food and energy prices.

Key Points:

1️⃣ Goldman Sachs: Firmer Core PCE, But Softer Trimmed Measure 🧾

• Forecast: Core PCE +0.3% m/m (standard measure)

• GS sees airfares and car prices lifting the print.

• However, their trimmed core PCE (excluding outliers) is only +0.2%, indicating more contained underlying inflation.

2️⃣ Morgan Stanley: Hotter Core at 0.35% m/m 🔥

• MS expects strong goods inflation and an uptick in core services ex-housing.

• Forecast: Core PCE +0.35% m/m, Headline PCE +0.32% m/m

• Food and energy price softness pulls down headline relative to core.

Conclusion:

Markets should brace for a firm February core PCE print, reinforcing the Fed’s cautious stance. While headline may cool, both banks highlight sticky underlying inflation, particularly in services. The Fed’s preferred inflation gauge staying elevated could delay rate cut expectations—especially if MS’s hotter forecast materializes.