Bank of America anticipates headline Consumer Price Index readings for April will show a 0.5% increase from March, a move the bank attributes principally to an estimated 4.3% monthly rise in energy prices connected to the effects of the Iran war. On a year-over-year basis, the bank expects headline CPI to reach 3.7%.
For core CPI, which excludes food and energy, Bank of America projects a 0.3% month-over-month advance, taking the annual rate to 2.7%. The bank points to an additional technical factor supporting the reported pace of core inflation in April: adjustments to rent data that stem from last year’s government shutdown, which interrupted the Bureau of Labor Statistics’ collection of October CPI data.
During the shutdown, the BLS used carry-forward imputation for rent and owner’s equivalent rent (OER) because actual collection was not possible. Rent panels are conducted on a semiannual cadence, meaning April’s rent measures will be compared to last April’s readings rather than to last October. Bank of America expects that comparison to likely yield higher readings for both rent and OER in April.
On the services side, the bank projects core services to accelerate to 0.39% month-over-month in April, up from 0.23% in March. Medical services are singled out for reversion toward trend: they rose only 0.01% in March versus a six-month average of 0.29%, and Bank of America expects a return to that broader pattern. The bank also notes that the semiannual health insurance inflation update is not expected to materially alter the CPI readings.
Bank of America expects core goods prices to be unchanged in April. Within that category, the bank projects declines in apparel and medical goods. Apparel had surged at an 11% annualized rate over the three months ending in March, but the bank anticipates a modest reversal after the February rollback of IEEPA tariffs.
Despite the central forecasts, the bank flags upside risks to both headline and core inflation. For headline CPI, food inflation is identified as the primary risk, with the potential for a larger reversion from last month than the bank has modeled. For core inflation, the bank acknowledges that core goods could print firmer if the expected decline in apparel does not materialize.
Combining its CPI outlook with financial services assumptions, Bank of America’s initial read on core Personal Consumption Expenditures (core PCE) for April is 0.23% month-over-month. At that rate, the bank projects year-over-year core PCE inflation would remain unchanged from its prior reading at 3.2%.
Note on limits of the analysis: The projections and risks above reflect Bank of America’s stated forecasts and assessments. Where the bank cites data adjustments or technical effects, the description is limited to the reasoning provided by the bank.