Synopsis:

BofA and Morgan Stanley expect May’s US CPI report to show a modest rise in both headline and core inflation. While headline pressures remain subdued, core inflation is expected to stay firm, reinforcing the view that disinflation will be slow and uneven, keeping the Fed on hold.

Key Points:

BofA Forecast:

• Headline CPI: +0.2% m/m

• Core CPI: +0.2% m/m, held in check by soft seasonal factors in autos and moderate services

• Preliminary core PCE estimate: +0.2% m/m, 2.7% y/y

Morgan Stanley Forecast:

• Core CPI: +0.26% m/m, 2.9% y/y

• Headline CPI: +0.17% m/m, 2.5% y/y (NSA Index: 321.776)

Drivers of the Print:

• Tariffs likely had a clearer effect on goods prices

• Seasonal softness in autos and contained services inflation capped core gains

• Investors may key in on whether core services reaccelerate or continue cooling

Conclusion:

Both banks see a restrained inflation print for May, but with core inflation still too sticky to justify early Fed cuts. A 0.2–0.26% core reading would confirm that while disinflation is progressing, it remains gradual, keeping rate cut expectations in check for now.