Synopsis:

Morgan Stanley expects March core CPI to rise by a modest 0.2% m/m, marking a slight slowdown in year-over-year inflation. While services inflation is expected to firm slightly, renewed goods deflation and falling gasoline prices should temper overall price growth.

Key Points:

• Core CPI Forecast: +0.2% m/m, slowing to 3.0% y/y from 3.1%.

• Goods Deflation: A decline in used car prices expected to drive goods prices lower.

• Services Rebound: Airfares and car insurance to show a modest reacceleration, lifting services inflation.

• Headline CPI: +0.1% m/m, with y/y rate dropping to 2.5% from 2.8%, driven by lower gasoline prices.

Conclusion:

Morgan Stanley sees inflation softening in March, led by renewed goods deflation. While services inflation could pick up slightly, the overall report should support expectations that price pressures are gradually easing.