Synopsis:

Morgan Stanley forecasts core PCE inflation at +0.18% m/m in May, matching Goldman Sachs' view and indicating stickier inflation. Meanwhile, they expect real personal consumption to contract slightly, suggesting softer consumer momentum.

Key Points:

• Core PCE Inflation (May):
  • Morgan Stanley forecast: +0.18% m/m

• Headline PCE Inflation (May):
  • +0.14% m/m, +2.3% y/y

• Spending & Income:
  • Real personal consumption: –0.1% m/m
  • Nominal consumption: Flat
  • Personal income: +0.1% m/m

Conclusion:

Morgan Stanley’s estimates align with a mild reacceleration in core inflation and softening consumption trends, supporting the Fed’s cautious tone. If confirmed, the data could temper July cut speculation, but reinforce September as a live meeting, contingent on upcoming labor and inflation prints.