Bank of America (BofA) has revised its inflation forecasts following an evaluation of the April inflation data and other economic factors. Core CPI, excluding used cars, rose by 0.4% month on month or 5.0% annualized, which is well above the Federal Reserve's target.
BofA has revised its forecast for core inflation up to 3.6% in the fourth quarter, compared to the previous prediction of 3.5%. The adjustment primarily reflects the surge in used car prices in April, along with expectations of another significant increase in May. BofA predicts these increases will reverse to some extent in the summer months, but it will eventually lead to a slower disinflationary path for core CPI.
Meanwhile, BofA has revised down its forecast for headline CPI to 2.9% from the previous 3.1%, due to downward adjustments in the expected inflation for food and energy sectors.