US Inflation: PCE revision seen as data clean-up – BNY

BNY Mellon’s Americas Macro Strategist John Velis argues that the upcoming PCE revision is a technical adjustment that will not alter the broader US inflation narrative. He highlights that portfolio management fees, which scaled with rising assets under management, distorted recent PCE readings versus CPI. The Bureau of Economic Analysis will shift to a labor-based methodology, improving the Fed’s preferred gauge without signaling real disinflation.

Portfolio-fee distortion in core PCE

"PCE revision will clean up the data, not change the inflation story."

"The recent PCE-CPI gap was driven in large part by a distortion caused by portfolio management fees, not a true surge in consumer inflation."

"This revision should narrow the gap between PCE and CPI and make the Fed’s preferred inflation gauge more reliable."

"Any softer core PCE readings after the revision should be read as a statistical correction, not a real disinflation breakthrough."

"Treat any softer PCE print as a statistical correction — less noise, not less inflation — rather than evidence of a real shift in the trend."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)