On Thursday, Citi revealed its prediction that the core Personal Consumption Expenditures (PCE) price index, a key inflation measure watched by the Federal Reserve, may be more dovish than expected.
The firm anticipates the core PCE inflation rate for March to come in at 2.7% year-over-year, slightly lower than Federal Reserve Chair Jerome Powell's expectation of 2.8%. This forecast comes ahead of the official numbers set to be released tomorrow.
The bank also provided insights into the first-quarter economic performance, indicating a softer inflation forecast with a 3.4% quarter-over-quarter increase in core PCE from January to March. This data was released today and could confirm Citi's expectations of a decelerating inflation trend.
Citi's analysis further suggests a slowdown in the U.S. economic growth, projecting a below-consensus real GDP growth rate of 2.0% quarter-over-quarter. This marks a significant decrease from the 3-5% growth rates seen in the latter part of the previous year.
Adding to the economic outlook, Citi pointed to additional labor market indicators that seem to show a weakening trend. The firm highlighted an expected net job loss in the third quarter according to the Business Employment Dynamics (BED) report, which contrasts with the more robust figures suggested by headline payroll numbers. This aspect of the labor market will be another key factor to watch in assessing the overall economic health.
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