US CPI Preview: Inflation softening, is there good news on the horizon?

The US Bureau of Labor Statistics (BLS) will release the most important inflation measure, the US Consumer Price Index (CPI) figures, on Wednesday, April 12. As markets get closer to the release time, economists and researchers of 10 major banks published their forecasts regarding the upcoming US inflation reading for March.

The annual inflation is expected to have risen by 5.2% year-on-year after increasing by 6% in February. The core reading, however, is foreseen at 5.6%, up from 5.5% previously. On a monthly basis, the CPI is forecast at 0.3%, while the Core CPI is expected at 0.4%.

Commerzbank

“Statisticians are likely to report a drop in the inflation rate from 6.0% in February to 5.3% in March. However, the March decline is entirely due to the fact that prices are now being compared with those in March 2022, when energy prices in particular had already risen significantly due to the Ukraine war. Indications of the underlying trend are more likely to be provided by the core rate, which excludes the volatile prices for energy and food. Here we expect an increase from 5.5% to 5.7%. The MoM rates also show that inflation is hardly calming down. Compared with February, prices across all goods and services probably rose by 0.3%, excluding energy and food by as much as 0.5%.”

ING

“Markets are increasingly doubtful that the Fed will be able to hike rates much further, but that could yet change after the upcoming CPI report. Another 0.4% MoM figure on core CPI, more than double the rate required over time to take the US back to the 2% YoY inflation rate target, could nudge expectations for the upcoming FOMC meeting higher. We still think the Fed would prefer to raise rates at least once more should financial conditions allow, but we see a strong probability that it reverses course and cuts rates by 100 bps later in the year as ever-tighter lending conditions, high borrowing costs, weak business sentiment and a deteriorating housing market all weigh on growth and rapidly dampen price pressures.”

Deutsche Bank

“We expect core inflation to come off a bit to +0.39%, although that would still leave the year-on-year change up a tenth at +5.6%. For headline inflation, we see a lower rate of +0.24%, taking the YoY rate down to +5.2%. Remember this month that there’ll be unusually large base effects at play, since the March 2022 surge in energy prices after Russia’s invasion of Ukraine will be dropping out of the annual comparisons.”

TDS

“Core prices likely cooled off modestly in March, with the index still rising a strong 0.4% MoM, as we look for recent relief from goods deflation to turn into inflation this month. Shelter prices likely remained the key wildcard, while slowing gas prices and softer food-price gains will likely dent non-core inflation. Our MoM forecasts imply 5.1%/5.6% YoY for total/core prices.”

NBF

“The energy component may have had a negative impact on the headline index as prices likely fell in both the gasoline and natural gas segment. Expected gains for shelter and used vehicles could still result in a 0.2% monthly increase in headline prices. The core index, for its part, could have increased 0.4% MoM, which would translate into a one-tenth increase in the annual rate to 5.6%.”

CIBC

“Core CPI likely decelerated to 0.4% MoM, in line with flagging consumer demand as excess savings have dwindled and the labor market has slowed, but that’s still too hot of a pace to achieve on-target inflation. Although private measures of used car prices have increased recently, the weight of that component in the CPI index has fallen sharply, and other measures of goods prices, including the PPI for finished core consumer goods, suggest that pressure in core goods prices could have been limited. Adding food and energy prices back into the mix likely showed more modest price pressures of 0.2% MoM for the total CPI, as prices at the pump fell in seasonally-adjusted terms. We’re nearly in line with the consensus expectation, which should limit market reaction.”

Wells Fargo

“After rising 0.4% in February, we look for the CPI to moderate to a 0.2% gain in March. With the initial surge in oil/gasoline prices stemming from Russia’s invasion of Ukraine a full year behind us, CPI when measured on a year-over-year basis should fall to 5.1% in March from 6.0% in February. However, another elevated reading in the core CPI is likely to indicate that the recent trend in inflation is little improved. Excluding food and energy, we look for the CPI to rise 0.4% and remain close to 5% on a three-month annualized basis. A further slowdown in core inflation is likely coming as the year progresses, but we doubt it will be evident in this CPI release.”

Citi

“We expect an increase in core CPI in March that is on the border between 0.4% and 0.5% MoM, but at 0.456% the forecast would again round to 0.5% MoM with risks tilted towards the upside for most components though with modest downside risks for the largest subcomponent of shelter prices. Most forecasts over the next few months will likely be factoring in a gradual slowing in shelter prices that has long been expected (a large one-month drop is possible, but unlikely).”

Danske Bank

“While lower energy prices will ease March headline inflation to around +0.2% MoM, we expect core inflation to remain elevated at +0.4%.”

ANZ

“We expect both core and headline CPI inflation to have risen by 0.5% MoM in March.”