FED Preview: Forecasts From 4 Major Banks

The US Bureau of Labor Statistics will release the April Consumer Price Index (CPI) data on Wednesday, May 11 at 12:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of 4 major banks regarding the upcoming US inflation print.

SocGen

“Seasonally-adjusted gasoline prices are expected to have dropped roughly 5% in April. Home heating and electrical costs should dampen the overall energy price boost to the CPI, but the energy component is key to the 0.2% MoM forecast increase. If this is the case, the YoY measure would fall to 8% from 8.5% in March and raise hopes that the CPI peak pace was set last month. The unknowns regarding energy price pressures linger, however, so we are calling the peak at 8.5%, noting that conviction rests on oil and gas price developments. Core CPI is still expected up 0.4% MoM (5.9% YoY), as rent and shelter components contribute a large share of the index, and they are set for a 0.4% increase.”

Deutsche Bank

“We are expecting a 7.9% reading, down from the four-decade-high 8.5% print in March, not least due to base effects. From here it should all be about the pace of the declines as things like the extreme YoY prices in used cars roll out of the data. However, on the other side, it is important to see how prolonged the rise in rents is. Remember that rents make up a third of the CPI basket and 40% of core. Used cars only make up a few percentage points. A reminder that the day-by-day calendar of events is at the end as usual.”

TDS

“Core prices likely stayed strong in April, regaining momentum to 0.5% MoM after recording 0.3% in March. While used vehicles prices likely declined again, they probably fell less sharply than in the last report. We also look for renewed strength in shelter inflation. Our MoM forecasts imply 8.1%/6.1% YoY for total/core prices, likely confirming March was the peak of the cycle.”

ING

“Consumer price inflation should hopefully show inflation has passed the peak with the YoY rate slowing from 8.5% to 8.3%, and core inflation edging down to 6.1% from 6.5%. Lower gasoline prices will be a big help, as will a drop in second-hand car prices as heralded by data from the Mannheim car auctions. However, it will be a long slow descent to get to the 2% target. As such, the Fed will continue to hike rates swiftly with 50bp rate hikes expected in June, July and September.”