US Consumer Price Index yy
Bank of America expects a partial reversal of the June inflation surprise in the upcoming July CPI report, with modest increases in both headline and core CPI expected, which could influence the Fed’s decision to cut interest rates in September.
Key points:
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Expected CPI:
- Monthly increase: Bank of America expects the core CPI to rise 0.3% on a monthly basis, with a non-rounded increase of 0.25%.
- Annual price: This increase is expected to keep the annual inflation rate steady at 3.0%.
- NSA Index: The NSA index is expected to record a level of 314.993.
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Contributing factors:
- Inflation in basic services: The high inflation rate in basic services is an important factor contributing to the monthly increase in the core CPI.
- Energy prices: Higher energy prices are also expected to contribute to the rise in the core CPI.
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Core CPI Forecast:
- Monthly increase: Bank of America expects core CPI to rise 0.2% on a monthly basis, with non-rounded increases of 0.22%.
- Direction alignment: Although these figures are slightly higher than the June figures, they are consistent with the previous trend of contraction.
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Implications for the Federal Reserve:
- Interest rate cut criterion: The expected rise in the core CPI is expected to meet the Federal Reserve’s benchmark for starting to cut interest rates in September, reflecting a continued trend toward deflation and controlled inflation.
conclusion: Bank of America expects the July CPI report to show modest increases in both headline and core inflation, reversing some of the negative surprises seen in June. This forecast is in line with the Fed’s criteria for starting to cut interest rates, supporting the possibility of monetary policy easing in September.
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