US CPI preview March 2023: forecasting a significant drop in headline CPI growth, but higher core CPI growth
US CPI preview March 2023: forecasting a significant drop in headline CPI growth, but higher core CPI growth
As more of last year's gasoline price surge rolls out of the YoY calculation, headline CPI growth is expected to fall significantly, but core CPI inflation risks a bigger policy mistake.
Executive summary
On a non-seasonally adjusted basis, I forecast MoM growth of 0.5% for the CPI and 0.6% for the core CPI.
On a YoY basis, I forecast the CPI’s growth rate to fall from 6.0% to 5.2%., and the core CPI’s growth rate to rise from 5.5%, to 5.7%.
Consensus is forecasting YoY CPI growth of 5.2% (in-line with my forecast), and core CPI growth of 5.6% (slightly below my forecast).
The main driver of my forecast for a significant reduction in the YoY rate of headline CPI growth, is an expected significant YoY decline in the CPI’s energy commodities index, as more of last year’s major increase in oil & gasoline prices drops out of the YoY calculation.
My forecast for higher YoY core CPI growth in March, as well as the potential for it to remain around current growth rates for some additional months to come (given the impact of durables prices having already disinflated and the lagging nature of services price changes), risks a more significant policy mistake from the Fed, which focu…