Morgan Stanley expecting slight deceleration in tomorrow's CPI

Morgan Stanley expects a slight deceleration in tomorrow's headline inflation data.

Core CPI is projected at 0.26% MM and 3.2% YY

Headline CPI is projected at of 0.09% MM and 2.3 YY

The main components to watch for tomorrow:

• Housing inflation is expected to soften, with rents anticipated to decelerate, particularly due to adjustments in the Owner's Equivalent Rent (OER) calculations and seasonal factors.
• Used car prices are expected to accelerate, which will push goods inflation into positive territory.
• Car insurance is expected to continue its downward path, with car insurance expected around 13% YY (versus the prior of 17% YY).

In terms of the possible broader economic and Fed policy impact the bank suggests that the disinflation trend aligns with the Fed's projections, and along with the solid labor market data should support the forecast of two more 25 basis point cuts in November and December.