Investing.com -- Tariff-related inflation may last longer than initially anticipated, Bank of America (NYSE:BAC) analysts warned in their latest U.S. Economic Weekly note ahead of the April Consumer Price Index (CPI) report next week
“Tariffs should start to affect the inflation data in April, with clearer evidence likely in May and June,” BofA said.
While the bank continues to view the inflationary impact of tariffs as temporary, it cautioned that “our conviction is low as there are good reasons why it could be more persistent than we expect.”
The U.S.-U.K. trade agreement, which included auto tariff relief in the form of a 10% levy instead of a 25% one, “does not move the needle for U.S. macro,” BofA noted.
However, BofA believes it did offer “relief to markets as it may signal additional trade deals in short order.”
Even so, the agreement has “no material impact” on BofA’s current forecasts, which assume “we are past peak tariff bearishness.”
The firm’s preview of the April CPI report projects both headline and core inflation to rise by 0.2% month-over-month.
On an annual basis, BofA expects core inflation to remain unchanged at 2.8% and headline inflation to ease slightly to 2.3%.
“We think we’ll see some signs of tariffs affecting the data, mainly through higher car prices,” the analysts wrote.
With the Federal Reserve keeping rates steady at its May meeting, BofA emphasized that the Fed is likely to stay on hold for the foreseeable future.
“If our base case of a steady labor market and rising inflation is correct, we don’t see a path to cuts in 2025,” the analysts concluded.