BofA Morning Market Tidbits: Inflation likely to be revised lower but the underlying story won’t change

Key takeaways Upcoming methodology changes to PCE inflation will likely revise down recent inflation. But this won't change the story for the Fed as inflation remains the more problematic mandate. Today's events: June jobs, Claims, May factory orders and Daly's comments. Methodology changes will likely lower recent inflation The BEA recently announced that it will make changes to how it measures prices for three known problem areas: portfolio management and investment advice, legal services, and computer software and accessories. In the latest Inflation Strategist, we estimate that the changes will lower recent core PCE prints by up to 20bp. But this would still leave %y/y core PCE above 3%. Moreover, the Fed was likely already discounting inflation in these components. So, the methodology changes are unlikely to change the Fed's mind that inflation remains the bigger problem of its dual mandate. Stephen Juneau - US Economist | BofAS Aditya Bhave US Economist | BofAS