August CPI report likely to show 'sticky' inflation: BofA

Investing.com -- Bank of America believes U.S. inflation will remain “sticky” in August, with both headline and core consumer price indices (CPI) showing continued upward pressure.

“We forecast headline and core CPI rose by 0.3% month-on-month in July owing to rising energy prices, steady tariff-driven goods inflation, and firm non-housing services,” BofA analysts said in their latest CPI Inflation Watch note.

Based on these projections, they expect year-on-year headline CPI to increase from 2.7% to 2.9%, marking its highest level since last July, while core CPI is likely to remain at 3.1%.

The bank highlighted that tariffs are expected to keep feeding through to consumer prices.

“Core goods prices likely rose by 0.2% month-on-month, as we look for tariffs to continue to be slowly passed through to consumers. Tariffs should contribute to ongoing price increases in household furnishings, apparel, and recreation commodities,” BofA said.

Analysts expect tariff-related goods inflation to persist over the coming quarters.

Non-housing services are also anticipated to remain firm. BofA noted that “non-housing core services prices rose 0.4% month-on-month, after a 0.5% increase in July. Airfares likely increased again owing to another strong seasonal factor, and lodging away from home should also climb.”

These gains reflect both mean-reversion after earlier declines and higher summer travel activity.

Based on these CPI forecasts, BofA expects core personal consumption expenditures (PCE) inflation to rise to 3.0% year-on-year in August.

“Our preliminary estimate for core PCE inflation in July is 0.27% month-on-month. If correct, core PCE would increase to 3.0% year-on-year in August,” the analysts said.

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