USD: Inflation pressures stay firm – Wells Fargo
Wells Fargo Economics expects April U.S. CPI to firm, with headline inflation rising toward 3.8% year-over-year and core near 2.9%. The team projects a 0.63% monthly gain in headline CPI and 0.50% in core, driven by energy spillovers and core services, while shelter inflation is seen cooling again later this year. Core and headline CPI seen elevated “Aprils CPI report will be more interesting than usual. The ongoing conflict in the Middle East has kept energy prices elevated, which will start to generate more obvious spillovers into other areas of inflation. We estimate headline CPI to rise 0.63% over the month, lifting the year-over-year pace to 3.8%.” “Excluding food and energy, we look for core CPI to increase 0.50% in April and 2.9% on a year-ago basis. The monthly pop is expected to be driven by core services, where strength will be partly—but not entirely—a mirage. The unwinding of a government shutdown-related survey quirk is expected to lead primary shelter to increase at twice its recent pace.” “We expect shelter inflation to quickly resume its moderation in May though, as real-time rent measures point to further softening. Excluding shelter, services should be genuinely hot thanks to higher jet fuel costs leading to a jump