According to the North American bank, the expectation is that basic inflation in the country will remain at 0.3% monthly
In a recent analysis of inflation measured by the CPI (Consumer Price Index) in the USA, released on Thursday (May 9, 2024), the Bank of America anticipated that inflation in the country will remain high, being a reason for discomfort before the release of next week’s data. The bank’s analysts project that the core indicator for April will register 0.28% monthly, a reduction in relation to the average of 0.37% observed in the first quarter of the year.
The expectation is that basic inflation will remain at 0.3% monthly. “While this is a moderation from the previous quarterly average, we do not consider it sufficient to reassure the Federal Reserve.”, Bank of America said. For general inflation, the bank predicts a monthly increase of 0.33%.
On the other hand, the Morgan Stanley adopted a slightly more optimistic view, announcing that “the descent has begun”. The bank expects core CPI inflation to reach 0.29% in April, with the annual rate set at 3.6%.
The analysis suggests that the decrease in inflation in April was mainly driven by a reduction in services, with emphasis on the expectation of lower inflation in car insurance, continued disinflation in rents and a reduction in the costs of health services. Furthermore, goods inflation remains negative, although it has improved due to lower deflation in used cars.
Morgan Stanley also projects that monthly inflation rates will become milder in the future, anticipating more accelerated disinflation from the 2nd half of the year onwards. According to the bank, this trend should provide the Federal Reserve with confidence that inflation is moving sustainably towards the established target.
Consumption will remain strong in April
Bank of America also projects consumer spending to remain strong in April in the US, despite seasonal influences that have affected recent trends. The bank’s data reveals that total spending on credit and debit cards per household rose 1.0% in April, after an increase of 0.3% in March. Although influenced by factors such as the start of Easter and other seasonal variations, the underlying momentum in spending remained relatively subdued but stable.
Low-income families were mainly responsible for the increase in spending, surpassing higher-income families in the bank’s records. This advance reflects improvements in after-tax wages and income growth for these groups, complemented by a solid savings base.
However, analysts point out that the cooling of the job market requires constant attention. Although tax refunds benefit low-income groups, an increase in debt payments may have limited the usual impact of spending associated with these refunds.
Another challenge for consumers is rising homeowners insurance costs, which adds an extra layer of economic hardship. Although certain factors that increase insurance costs may remain the same, consumers continue to adapt their spending decisions to the financial dynamics that continue to evolve.
Data compiled by BofA emphasizes consumers’ ability to maintain their spending, demonstrating remarkable resilience in the face of economic challenges.
With information from Investing Brazil.
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