Data Preview & Forecast
MUFG forecasts April 2026 core CPI monthly growth (MoM) of 0.29% and annual growth (YoY) of 2.65%.
The base effect is expected to contribute 0.24% points to YoY growth in core CPI, up slightly from the low contribution in March.
CPI shelter components are calculated using a 6-month panel collection, with the distortion from the missed Oct collection being resolved in Apr 2026 when the same housing panel is used again. As a result, ~0.01–0.02% point boost to MoM core CPI is expected.
What to watch out for: Fuel surcharges are expected to keep airline fares and shipping/logistics inflation elevated in April. Used car inflation is expected to move into positive territory, while the tariff effect on overall core goods inflation is expected to peak.
Market Thoughts
Base-case view: From current UST rate levels, a 0.3% MoM core inflation reading (consensus est.) could prompt a small initial rally in rates, especially if the inflation report is driven primarily by transitory factors (e.g., fuel surcharges) and/or methodological changes (i.e., the shelter adjustment). However, we would sell into a rates rally that is technically driven because lingering concerns of feed-thru from the War and elevated oil prices will limit rates rallies, for now.
Upside risk: Coming off the back of a stronger than expected NFP, if core CPI comes in well above 0.3% MoM, rates would see a decent sell-off led by the 2yr, but buyers likely cap the move at ~4.0%.
Downside risk: Overall, a softer inflation reading would likely be dismissed as a start of a trend given the concerns over oil prices.
Please see the link for the full write-up with charts and scenarios…