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US CPI Preview: Forecasts from 10 major banks, inflation still too high

by FX BrokerNews

The highly anticipated release of the US Consumer Price Index (CPI) figures by the US Bureau of Labor Statistics (BLS) is scheduled for Tuesday, March 12, at 12:30 GMT. As we approach the release time, economists and researchers from 10 major banks have provided their forecasts for the upcoming inflation report in the United States for February.

Projections indicate a month-on-month increase of 0.4% in headline prices, surpassing the previous release of 0.3%. Year-on-year, the headline CPI is expected to remain stable at 3.1%. The Core CPI, which excludes volatile energy and food data, is anticipated to show a slower monthly increase of 0.3% in February compared to 0.4% in January. On an annual basis, a deceleration from 3.9% to 3.7% is expected.

Wells Fargo

Anticipated data suggests that, despite persistently high inflation, the underlying trend may not be gaining strength. We project a 0.4% increase in Headline Consumer Price Index (CPI) for February, driven partly by a surge in gasoline prices, maintaining the year-over-year rate at 3.1%. However, Core CPI is expected to moderate in February, with a predicted 0.3% monthly gain, leading to a slight decrease in the year-over-year rate to 3.7%.

While goods deflation may be less pronounced in February, we anticipate a smaller uptick in core services compared to January. The growth of owners’ equivalent rent is likely to continue trending lower, despite a January increase, and the prospect of residual seasonality boosting services in February appears less likely. Nonetheless, with the core CPI expected to maintain a 3.9% annualized pace over the three months through February, the Federal Reserve is likely to seek additional confidence that inflation is on track to return to the target on a sustained basis for an extended period.


We anticipate a 0.3% month-on-month increase in core Consumer Price Index (CPI) inflation for February, driven by higher energy prices, while the headline figure is expected to rise by 0.5% month-on-month. Although January saw positive surprises in Supercore and rent inflation, a partial reversal is expected in February, albeit potentially modest due to lingering seasonality in Supercore.

Despite a slight easing in the past year, there is still a substantial excess demand for labor, primarily attributed to an increased labor supply. Closing the gap between demand and supply is likely to require weaker demand. While Federal Reserve (Fed) officials acknowledge the recent easing in inflation, they remain cautious, noting that inflation is still too high and progress has been uneven across various components. The Federal Open Market Committee (FOMC) officials seek greater confidence that inflation is moving towards the 2% target before contemplating any considerations for rate cuts.


Our projections for the February Consumer Price Index (CPI) report indicate a deceleration in core inflation, slowing to a 0.3% month-on-month pace following the previous report’s acceleration to 0.4%. Regarding the headline figures, we anticipate a more robust 0.4% month-on-month increase, driven by a rebound in energy inflation for the month of February. On a year-over-year basis, we expect the headline CPI to remain steady at 3.1%, while the core CPI is projected to decelerate from 3.9% in January to 3.7% in February.


Anticipated data for February suggests a lower core rate of 0.3% compared to the previous month, although it remains relatively elevated. Prices across all goods and services, however, are expected to have increased by as much as 0.4%, surpassing January levels. This uptick is attributed to the recent rise in gasoline prices after a decline at the beginning of the year. Within the US Federal Reserve, these figures would likely support those advocating for more substantial evidence of inflation easing before considering any interest rate cuts. Our stance remains that the markets may have priced in excessive expectations for rate cuts.

Deutsche Bank

Anticipating the upcoming data, we project headline Consumer Price Index (CPI) to increase at a faster pace of 0.41%, outpacing the core CPI growth at +0.30%. As a result, the year-over-year core CPI is expected to decrease by two-tenths to 3.7%, while the headline CPI is predicted to remain unchanged at 3.1%. Of note is a slight concern regarding the three-month annualized rate, which is expected to decrease by only a tenth to 3.9%, while the six-month annualized rate is projected to rise by a tenth to 3.7%.


The surge in gasoline prices throughout the month is expected to positively influence the headline index, particularly through the energy component. Coupled with a notable increase in shelter costs, we anticipate a 0.4% rise in headline prices. The year-over-year rate is likely to remain steady at 3.1%. In contrast, the advance in core prices may exhibit a slightly more restrained growth at +0.3% month-on-month, partly due to another weak performance in the core goods segment. Despite this, the monthly gain is anticipated to bring the annual rate down by two ticks to 3.7%, marking its lowest level in nearly three years.

RBC Economics

We anticipate a milder price report for February, with consumer price index growth holding steady at 3.1%, driven by higher energy prices. However, we expect slower growth in the ‘core’ index (excluding food and energy). Gasoline prices are estimated to have surged by 4.4% in February, and while food prices are anticipated to rise, the pace is expected to be slower than in the previous month. Core inflation is projected to decelerate to 3.7% year-over-year, reflecting a 0.3% increase from January. Shelter costs, which have been a significant contributor to price growth, are expected to continue slowing as the moderation in home rent growth extends to lease renewals.


The upcoming release of the Consumer Price Index (CPI) for February is likely to reveal a 0.4% increase in the headline reading, primarily attributed to energy. Our precise calculation falls between 0.3% and 0.4%, rounding up. While markets may be willing to overlook the headline figure, concerns arise as January’s core CPI experienced a 0.4% uptick. There’s a reasonable risk that the core CPI for February could be as high as 0.3%. The persistently challenging factor affecting falling CPI inflation is the ongoing increase in rents. We anticipate a 0.4% rise in owners’ equivalent rent for February, following a 0.6% increase in January.


Following an unexpectedly robust 0.39% month-on-month increase in core Consumer Price Index (CPI) in January, we anticipate another substantial 0.33% increase in February, albeit with some nuanced differences. This includes a more modest 0.1% decline in core goods prices during February, counterbalanced by robust overall services prices. However, there is an expectation of a more restrained 0.45% increase in core non-shelter services, compared to the notably strong 0.85% increase observed last month. Despite a continued strong trend, shelter inflation is projected to see a more moderate 0.50% increase in owners’ equivalent rent for February, along with a 0.38% increase in primary rents. The headline CPI is forecasted to rise by 0.5% month-on-month (0.46% unrounded), with the year-over-year figure remaining at 3.1%, driven by strength in energy prices.


We do not believe we are on the brink of a second inflation surge. Our expectation for the February Consumer Price Index (CPI) is a 0.3% month-on-month increase for both the headline and core readings. This assumption is grounded in the belief that the January adjustments in wages and prices, possibly influenced by the robust economy and residual seasonality, have concluded. Consequently, we anticipate a more moderate non-housing services print for the month. While shelter costs may remain elevated, goods prices are expected to persist in deflationary territory. Although this may not align with Chair Powell’s ideal inflation composition, given the strong performance of the economy and core inflation at a reasonable level, the Federal Reserve has the flexibility to work towards achieving a more sustainable inflation composition over time.

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