Fed's preferred measure of inflation, PCe deflator, reviewed - Nomura

Analysts at Nomura noted the PCE deflators data, the Fed's preferred measure of inflation and gave their review.

Key Quotes:

"Core PCE inflation, at 0.3% (0.271%) m-o-m in January, was in line with market expectations but above our forecast of 0.218% while the y-o-y rate remained unchanged at 1.5% (1.515%), in line with our and the market’s expectations. 

As the January reading was partly boosted by an idiosyncratic move in hospital service prices, it does not affect our medium-term outlook on core inflation. We continue to expect a gradual upward path for core inflation over the coming quarters. For our latest inflation outlook in response to new fiscal policy, read Forecast Update, 11 February 2018. Most other components were in line with expectations, with a strong gain in energy prices and a modest increase in food prices leading to a 0.4% (0.368%) m-o-m increase in headline PCE inflation, corresponding to 1.7% y-o-y."