Synopsis:

Bank of America expects the March U.S. CPI report to show softer headline inflation, but firmer core inflation, with early signs of tariff pass-through starting to appear in core goods prices.

Key Points:

• Headline CPI Forecast:

  • +0.1% m/m (0.09% unrounded)

  • Annual rate expected to drop to 2.5% from 2.8%

  • Relief likely from falling energy and egg prices

• Core CPI Forecast:

  • +0.3% m/m (0.27% unrounded)

  • Annual core inflation rate to dip slightly to 3.0%

  • Early evidence of tariff effects seen in core goods, due to a significant year-on-year increase in duties

Conclusion:

While headline inflation is cooling, core remains sticky, with tariff-related pressures just starting to feed into prices. This mix could keep the Fed cautious, especially if the trend in core inflation persists into Q2.