We see core CPI inflation as likely accelerating to 0.29% m-o-m in April from 0.20%, largely due to technical factors associated with rent-related components. Our forecast translates into a y-o-y change of 2.8% up from 2.6% in the previous month. Positive payback from the BLS’s carry-forward imputation in October last year likely boosted both regular rent and owners’ equivalent rent substantially in April, pushing up aggregate m-o-m core CPI inflation by 9bp. Our forecast for headline CPI inflation is 0.51% m-o-m in April or 3.7% y-o-y, driven by higher gasoline prices. Supercore service CPI inflation likely decelerated in April. We expect core PCE inflation remained elevated at 0.28% m-o-m in April, following 0.29% in March. Our forecast for y-o-y core PCE inflation is 3.30%, up from 3.20% in March. We expect core goods prices accelerated in April. Our forecast for core goods inflation is 0.20% m-o-m, up from 0.11% in March. With Iran conflict continuing for more than 2 months now, we expect Fed to remain on hold for next several months. We still see a lone 25 bps cut in Q4CY26 as an insurance cut under Kevin Warsh as Fed Chair. Market is currently pricing in status quo by end CY26 which looks to us an opportunity to receive. 1yr-1yr US SOFR is currently at 3.72 where we want to receive half risk and another half risk at 3.90. Stop loss to this view is 4% and profit target is 3.5%. We also like to receive 2*10 US SOFR steepeners around current levels of 22 for an eventual profit target of 40 with stop loss around 14 levels.
