US CPI Preview: Forecasts from eight major banks

The Consumer Price Index (CPI) reading from the US at 13:30 GMT is pointing to a rise in the year-on-year reading to +3.6%. That would be the highest annual CPI number since September 2011 if realised, and up from 2.6% in March. As we get closer to the release time, here are the forecasts by the economists and researchers of eight major banks regarding the upcoming data.

ING

“Consumer price inflation is likely to jump to close to 4% as prices in a vibrant reopening economy contrast starkly with those from 12 months ago when the economy was in lockdown and companies were slashing prices to generate cash flow. These ‘base’ effects should ease as we move through the third quarter, but we continue to believe that inflation could be more persistent than we have seen in previous economic cycles. Commodity prices, freight charges, supply chain disruptions, surging house prices and rising employment costs all factor into our thinking. At the same time, the positive growth and jobs story we are seeing will mean any spare capacity will be swiftly eaten up. This leads us to conclude that the Federal Reserve is more likely to raise interest rates in early 2023 rather than leave it until 2024 as they are currently signalling.”

TDS

“We advise against extrapolating, consistent with Fed officials citing ‘transitory’ factors, but a surge in used vehicle prices, along with strong reopening-related gains in airfares and hotel rates, likely led to a sharp pickup in the core CPI. Moreover, base effects will add to the YoY data. We forecast 3.7%/2.5% YoY for total/core prices, up from 2.6%/1.6% in March.”

RBC Economics

“US CPI growth is expected to jump to 3.7% YoY in April and 2.3% core rate in April. Markets will continue to look for signs on firming underlying price growth outside of transitory price increases from weak year-ago levels.”

NBF

“We expect the core index to have gained 0.3% for the second month in a row. As a result, the annual core inflation rate could move up from 1.6% to a 14-month high of 2.2%. Headline prices, meanwhile, could have risen 0.2% MoM despite a slight decline in seasonally-adjusted gasoline prices. This gain, combined with a strongly positive base effect, should allow the annual rate to rise from 2.6% to 3.6%, the highest figure recorded since September 2011.”

ANZ

“We expect US core inflation to rise by 0.3% MoM (2.3% YoY) in April, with headline also increasing by 0.3% MoM (3.7% YoY). At his Q&A session post the 27-28 April FOMC meeting, Fed Chair Powell said base effects will contribute around 1.0 and 0.7 percentage points to headline and core CPI (YoY) respectively. Despite a stronger-than-expected March CPI and surveys pointing to intense pricing pressure, market measures of longer-term inflation compensation have eased over the past month. Fed officials remain of view that the forthcoming rise in inflation will be temporary. Powell says a persistent rise in inflation is unlikely until maximum employment is achieved. The latter is some way off. That said, they will watch inflation expectations closely to ensure they remain consistent with their 2% target.”

CIBC

“Core readings for CPI and PPI could both be hotter than what’s needed for 2% inflation, a reminder that the upturn we’re seeing in inflation isn’t just about gasoline being more expensive than a year earlier. April’s acceleration in inflation will reflect base effects, and supply chain bottlenecks amidst solid demand from reopenings. It’s likely that total CPI inflation accelerated to 3.6%, and core inflation to 2.3%. We see scope for a more sustained rise in inflation towards the 2½% mark in 2022, on a broad-based tightening in the labor market.” 

Capital Economics

“We expect a large 0.4% MoM gain in core consumer prices in April. Together with base effects, that would push core inflation up to 2.4%, and headline inflation to a decade-high of 3.8%.” 

Citibank

“We expect a solid 0.301% increase in core CPI in April but would not be surprised by an even stronger increase that rounds to 0.4%. More persistent increases in shelter prices would be a sign that underlying inflation pressures are picking up and core PCE inflation above 2% YoY can be sustained through 2022.”