US: PCE inflation profile reinforces our call for a pause in October

Annual revisions lowered core PCE inflation sharply to 2.98% y-o-y in July from 3.34% previously, a larger downward revision than we expected. August core PCE inflation rose 0.247% m-o-m, close to our forecast of 0.278% m-o-m. However, backward revisions left y-o-y inflation at just 3.01%, below both our forecast and policymakers' expectations, including recently disclosed projections from Chair Warsh and Governor Cook. A significant share of the downward revision came from portfolio management and investment advice prices, whose y-o-y rate was revised down to 8.6% in July from 20.8%. Under the BEA's new methodology, this component now appears less sensitive to stock price swings and more stable, which should make it easier for the Fed to achieve its inflation goal;