UBS US Economic Perspectives: April CPI Preview — Gasoline Fuelling Inflation
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UBS previews the upcoming April US Consumer Price Index report, forecasting a 0.4% month-over-month increase in headline CPI and a 3.5% year-over-year inflation rate. Core CPI is projected to rise 0.3% month-over-month, maintaining a sticky 3.8% year-over-year pace. Gasoline prices remain the primary catalyst for inflationary pressure, expected to surge 5.5% month-over-month and directly contribute roughly 0.2 percentage points to the headline CPI increase.
Beyond energy costs, other inflation components display more moderate trends. Food prices are projected to tick up a modest 0.2%. Housing costs, particularly owners' equivalent rent, remain stubbornly high at a projected 0.4% monthly increase. Core goods prices are anticipated to remain flat, as declines in used vehicle valuations are offset by marginal gains across other consumer product categories. Services excluding housing are slated to rise 0.2%, driven by marginal upticks in medical and transportation services.
UBS notes that rising gasoline costs, exacerbated by OPEC+ production cuts and seasonal summer demand, will directly elevate the headline monthly CPI. However, the underlying inflation dynamics remain largely consistent with broader macroeconomic expectations. Consequently, this report is unlikely to alter the Federal Reserve's cautious monetary policy trajectory. The central bank is widely expected to maintain its current interest rate stance at the upcoming June meeting, preferring to observe further data before adjusting its policy position.
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