Investors are bracing for April's CPI report on Tuesday, which could show early signs of tariff-driven inflation. Bank of America Securities senior US economist Stephen Juneau joins Morning Brief with Madison Mills and Brad Smith to discuss where the data may reflect the impact of recent trade tensions.
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Well, Tuesday morning, investors will get a fresh read on inflation with the April CPI print, and it could be the first set of hard data to see a direct impact from the president's trade war. Currently, core CPI is forecast to rise 0.3% in and that comes after rising 0.1% in March. Joining us now, Stephen Juneau, BVA security senior US economist. Stephen, great to have you here this morning. Talk to me about this CPI print. It's coming at a very interesting time, right after we get headlines of these trade negotiations. To what extent do you think that this week's CPI print is going to signal an inflationary backdrop before those deals were struck?
Yeah, well, thanks for having me on. So it's going to be interesting data for sure. I think it's probably the first month where we get a little bit of signs that we're seeing the impact of tariffs, and it's not going to be broad-based. I think it's probably more concentrated in autos. Remember we had that front-loading demand where we saw new vehicle sales spike in March, really hold up very well in April. And we've seen prices from JD Power move up higher, used car prices move higher. So these things is where these items are where we think we're going to see really tariff effects. And of course, we had greater tariff revenue in April as well, so you could see broader signs in the core good side. But overall, we're a little bit below consensus because we don't think this is the worst of it. We think future increases are likely to come, but this is all predicated on kind of assumptions prior to the news we got over this weekend, this morning, where we saw tariff rates really trimmed significantly against China. So that's going to limit upside risk as well to inflation in the near term too. So there's still it's a lot of moving parts right now, a lot to unpack, but it will be a very interesting data release tomorrow.
Stephen, perhaps you can help us make sense of something. When you have companies that are saying, and and it's showing up in the data to a certain extent, how they're bringing in some of those imports ahead of time. We we saw that within the GDP print, the first release of it for the first quarter. And now we're also thinking about on the back end of this, the number of ships that just wouldn't dock, the vessels that were staying out of the port because they didn't want to incur the charges. And so, how do you kind of read through those headlines and see where and assess where it trickles through to the real data that comes out?
No, it's what makes it challenging, right? We knew businesses responded to this with front-loading. We know that inventory has been built up, so to speak, to kind of give you some runway to prevent kind of that immediate increase on tariffs. So I think that's where timing becomes difficult, so you probably have a little bit of leeway. You don't have to go one for one with when the tariffs kick in, I've got to raise prices. You have that inventory backdrop, so that gives you some time. And then with all this uncertainty out here with kind of tariff announcements changing by the day, tariff rates changing every hour, businesses are probably just trying to, you know, muddle through this right now. So maybe you don't see those immediate increases. So I think that's where we've got to see it in the data. The Fed has to see it in the data. You heard from Powell last week that, you know, there's a lot of uncertainty about how this evolves over the coming months. And they need to see that evolution. We, as economists, need to see some evidence of it, and we haven't seen it yet. So, I think there's a lot of factors to unpack, and of course, obviously the policy changes that we got recently is something that we have to figure out too.
Stephen, 30 seconds. Let's talk about the Fed there. What does the growth backdrop here change? How how does that impact what the Fed will be able to do going forward?
Yeah, well, we were always in the camp that the Fed wasn't cutting this year. We thought that we would avoid a recession, we would see more of a stagflation outcome. So with inflation running away from the Fed, moving up towards a peak of 3.5%, growth at around 1%, um, that the Fed just wouldn't be able to have to cut this year. They wouldn't have a window of opportunity for that. I think that persists even in this revised scenario. There's less risk of recession, maybe less upside risk to inflation, but inflation still moves higher, and it was already running at 2.6% before this tariff shock.