Wells Fargo Economics projects that U.S. inflation pressures will remain firm in April, with headline Consumer Price Index (CPI) expected to rise by 0.63% month-over-month, pushing the year-over-year rate to 3.8% [1]. Core CPI, which excludes food and energy, is anticipated to increase by 0.50% in April and reach 2.9% on a year-over-year basis [1]. The report highlights that elevated energy prices, partly due to ongoing conflict in the Middle East, are beginning to spill over into broader inflation categories [1].
The anticipated monthly increase in core CPI is attributed mainly to core services, with a notable uptick in primary shelter costs expected due to the unwinding of a government shutdown-related survey quirk [1]. However, Wells Fargo expects shelter inflation to moderate again starting in May, as real-time rent measures indicate further softening [1]. Excluding shelter, services inflation is projected to remain strong, driven by higher jet fuel costs and a resulting jump in airfares [1].
Looking forward, Wells Fargo forecasts that the year-over-year rate of core CPI will remain close to 3.0% throughout the year [1]. While shelter inflation is expected to cool, progress in other categories is proving more difficult [1]. The report also notes that slowing wage growth has reduced consumer purchasing power, which may limit firms' ability to pass on higher costs to consumers, potentially tempering broader inflation by year-end even as underlying pressures persist [1].
CONCLUSION
Wells Fargo anticipates that U.S. inflation will remain elevated in the near term, with headline and core CPI both showing firm gains in April. While shelter inflation is expected to moderate, persistent pressures in other areas and slowing wage growth suggest inflation may remain stubbornly high through the year. This outlook points to ongoing challenges for policymakers and markets monitoring inflation trends.