Will Core PCE MoM be 0.2% in September?

The current odds for the Core PCE MoM being 0.2% in September are sitting at a reasonably low 31% chance, indicating that the crowd is not banking on this outcome. If you dig a bit deeper into what this market is asking, it’s basically about forecasting inflation trends, especially since PCE (Personal Consumption Expenditures) is a crucial indicator of consumer spending and a key metric the Federal Reserve watches.

The Core PCE excludes food and energy prices, making it a more stable gauge of ongoing inflation trends. Given the recent economic climate, where inflation has been a hot topic, a figure of 0.2% might be seen as a sign the Fed’s rate hikes are having the desired effect. However, it seems most traders are skeptical about hitting that mark for September.

One reason behind the low odds could be the larger economic data we've been seeing. If you look at recent trends, many analysts have been predicting higher inflation linked more to remaining supply chain issues and rising demand pressures. Just recently, we saw some upticks in consumer spending and wage growth, which often translate into higher prices down the line.

Another factor driving these odds might be trader sentiment and broader economic forecasts. If people are reading the tea leaves and expecting a grimmer situation with inflation, they might be less inclined to back a lower figure like 0.2%. The Fed has been fairly vocal about needing to see those inflation numbers come down, and if there’s a prevailing belief that its efforts have yet to yield results, we’re likely seeing that reflected in the betting odds.

Looking ahead, attention will be on upcoming economic reports and any statements from the Federal Reserve. If similar indicators suggest inflation isn’t cooling as expected, we might see those odds drop further. On the flip side, should some positive economic data emerge, traders might shift their bets towards a more favorable outcome.

Curiously, with the odds being this low, there's a potential for value here for those who trust in a more optimistic outcome. If we see shifts in sentiment influenced by upcoming macroeconomic forecasts, those odds could bounce. Keep an eye on consumer confidence reports, as well as any shifts in the Fed's messaging. The market seems to be bracing for a bumpier inflation path, but, as always, the unpredictable nature of the economy can flip sentiment on its head quickly.