Synopsis:

Both Barclays and Morgan Stanley forecast modest monthly gains for the October CPI, expecting headline CPI to rise by 0.2% month-over-month (2.6% year-over-year) and core CPI by 0.3% (3.3% year-over-year). Persistent pressures in core goods, particularly used car prices, are anticipated to sustain core inflation near previous levels, with only slight easing in core services.

Key Points:

• Headline CPI Forecasts: Both banks expect a 0.2% month-over-month increase in headline CPI, marking a 2.6% annual gain. Easing in energy prices is expected to be less impactful than in previous months.

• Core CPI Expectations: Core CPI is projected to increase by 0.3% month-over-month and 3.3% year-over-year, consistent with September’s pace, indicating that inflation pressures remain steady in core components.

• Drivers of Core Inflation: Barclays highlights further acceleration in core goods, particularly in used car prices, as well as modest disinflation in core services, suggesting limited relief in overall core price pressures.

Conclusion:

Barclays and Morgan Stanley anticipate steady core inflation in October, driven by ongoing pressures in goods and minimal easing in services. Headline inflation may see limited impact from energy price trends, with both banks projecting consistent CPI gains that could inform the Fed’s near-term outlook on inflation.