US CPI aa
Bank of America forecasts more moderate core inflation for March, suggesting a potential relief from inflationary pressures. Core CPI is expected to decline slightly, driven by lower prices for basic goods and less pressure on services prices, to round 0.2% month-on-month. The headline CPI is expected to increase slightly, to round 0.3% month-on-month. Such results could boost confidence in the Federal Reserve, potentially paving the way for a rate cut in June.
Key points:
- Moderation in the basic CPI: It is expected to round to 0.2% month-on-month due to a slight decline in prices of basic goods and reduced price pressures for basic services.
- Increase in overall CPI: It is expected to round to 0.3% month-on-month, aligning with mild inflationary pressures.
- Implications for Fed Policy: A CPI report in line with BofA’s expectations could bolster the possibility that the Fed begins its rate cut cycle in June, echoing market forecasts that there is a 70% chance for a 25-point cut basic.
- Risks to the political outlook: A significantly stronger report could call into question the likelihood of a rate cut in June, particularly if core CPI beats expectations, aligning more closely with a 0.3% monthly increase in core PCE .
Conclusion:
Bank of America’s forecast of a slowdown in the CPI in March could be a positive signal for the Federal Reserve, maintaining the possibility of a rate cut in June. This anticipated easing of inflationary pressures, particularly on the underlying CPI, is in line with market expectations and could reassure both the Fed and investors. However, significantly higher inflation could pose risks to this outlook, potentially delaying the start of the rate cut cycle.
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