Morning Market Tidbits Not a Good Wedge for the Fed

BofA notes a significant divergence between core PCE and CPI goods inflation driven by AI demand and software weights, which may complicate the Federal Reserve's inflation outlook.

Key Takeaways

• 1.Core goods PCE is currently running higher than core goods CPI, primarily driven by demand for AI inputs and differences in category weights.
• 2.The atypical divergence (wedge) between CPI and PCE measures may persist, making it difficult for the Fed to dismiss sticky goods inflation.
• 3.Market focus for the day is on April PPI data and scheduled comments from Fed officials Collins, Kashkari, and Logan.

Table of Contents

• Key takeaways
• What Matters Today
• An atypical wedge in core goods
• Mind the weights
• US GDP Tracking
• Today's economic calendar
• Disclosures
• Research Analysts

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