Bank of America sees headline inflation falling to 3.1% in June

Bank of America economists expect headline inflation to fall to its lowest levels since March 2021.

BofA sees headline CPI rising 0.3% in June with the rate dropping 0.9% to 3.1%. The consensus also sees a 0.3% increase.

One of the key drivers behind the forecast for inflation deceleration is a downshift in used car prices.

“The recent decline in headline CPI is also a function of favorable base effects given a surge in energy prices last year,” the economists wrote in a client note.

is also seen jumping 0.3% month-over-month, in line with the consensus.

“This would mark a deceleration from the 0.4% m/m pace averaged over the last six months and would result in the y/y rate declining three-tenths to 5.0%. It would also push the 3-month annualized rate down to 4.6%, which would be the first reading below 5% since September 2021.”

Still, BofA economists expect that both non-core components of inflation – food and energy – to have increased on the month.

“We forecast food inflation rose by 0.1% m/m owing to ongoing price increases in food away from home inflation given the lagged effects of strong wage growth. That said there is some evidence that dining out demand is softening as seated diners, according to OpenTable, are down relative to last year. Meanwhile, we forecast energy prices rose by 0.3% m/m due to increases in both utilities and gasoline,” they concluded.

The official June CPI data is out next Wednesday, July 12.