US CPI Prep (12th August)

Forecasts and Ranges
US CPI MoM Forecast 0.1%, Previous -0.4% Range 0.4% / 0%
US CPI YoY Forecast 3.4%, Previous 3.5% Range 3.8% / 3.2%
US Core CPI YoY Forecast 2.5%, Previous 2.6% Range 2.7% / 2.3%
US Core CPI MoM Forecast 0.2%, Previous 0% Range 0.3% / 0%

Investment Bank Views
Bank of America
The July CPI inflation estimate is expected to be more consistent with previous trends, following a mild June reading. The headline is likely to increase by 0.1% month on month (3.4% year on year) as gas prices declined again.
Core CPI is expected to rise by 0.20% monthly and 2.5% annually, marking the lowest reading since January. Inflation in core goods is expected to continue low, while core services are expected to return to trend levels following the June decrease. Core PCE is expected to be higher than core CPI by 0.24% m/m (3.3% y/y), indicating a potential September hike.

Wells Fargo
Excluding food and energy, the core CPI is predicted to grow by 0.24%, rebounding from June’s lackluster figure. Apple’s pricing increases are expected to boost consumer electronics prices, while tariff-related pressures in other categories are expected to subside. Core services inflation is expected to increase from June levels. In July, headline CPI inflation is expected to fall to 3.4% year-over-year. The analysis suggests that the inflationary effects of rising tariffs and the Middle East war have been mitigated.

Goldamn’s Sachs
Softer hiring has reduced the chance of a raise, but the US market’s reaction to the report implies that the ball is still in the inflation court. We believe the bar should be raised for next week’s inflation reading to reinstate a September rise as the clear modal result, while there is more room for softer core to lead to a more sweeping decrease in hike probability.

NOTE OF IMPORTANCE  – WSJ’s Timiraos: The focus will be on month-over-month July CPI inflation as more Fed officials assess whether inflation can return to 2% without further tightening.

Summary of Last Report
CPI fell 0.4% m/m in June (after rising 0.5% m/m previously), with inflation at 3.5% y/y, while core CPI was unchanged m/m and increased 2.6% y/y. The decline was driven mainly by energy, with gasoline prices falling sharply, while shelter increased only modestly and remained one of the largest contributors to overall inflation.

Food prices rose 0.2% on the month, while core inflation was mixed across service categories, with declines in motor vehicle insurance, communication, apparel and medical care offsetting increases in recreation, household furnishings and personal care. Overall, headline inflation was helped significantly by lower energy prices, while underlying price pressures continued to ease gradually.