April CPI Inflation: Core Concern

The April CPI report showed a significant beat in headline (0.6%) and core (0.38%) measures, driven by energy spikes and sticky core services. BofA analysts maintain that the Fed will remain on hold until 2H 2027 as inflation becomes increasingly 'uncomfortable'.

Key Takeaways

• 1.April Headline CPI rose 0.6% m/m, significantly driven by a 3.8% spike in energy prices due to the Iran conflict.
• 2.Core CPI printed at 0.38% m/m, with core services inflation (ex-housing) at 0.5% m/m being the primary concern for the Fed.
• 3.The Federal Reserve is unlikely to cut rates before 2H 2027, with markets beginning to price in potential hikes if unemployment stays low.

Table of Contents

• Another jump in inflation
• Iran conflict continues to drive inflation
• Core goods inflation was benign
• Core services: too hot to handle
• Fed: running out of excuses
• Glossary
• Rates and FX: Financial initial market reaction
• Disclosures
• Research Analysts

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