"U.S. 'Inflation Week' kicks off, Morgan Stanley: Tuesday's CPI data may be 'even more explosive'"

```

America’s "Inflation Week" has officially begun: CPI (Tuesday), PPI (Wednesday), and Import Prices (Thursday) will all be released this week, directly affecting the Federal Reserve’s policy decisions.

Matt Hornbach, Global Head of Macro Strategy at Morgan Stanley, warned on Monday that the April Consumer Price Index (CPI) to be released on Tuesday will show “more explosive” data.

He also emphasized that what the market really needs to pay attention to is the combined impact of all inflation data this week on the Personal Consumption Expenditures (PCE) Price Index—the Fed’s preferred inflation gauge. Morgan Stanley currently maintains its baseline forecast that the Fed will stay put this year.

U.S. Treasury yields have been rising recently, reflecting traders’ concerns over inflation prospects. The Federal Open Market Committee (FOMC) will hold its next policy meeting on June 16–17, with policymakers facing a batch of intensive inflation-related data at that time.

CPI May Be “Hot,” Oil Prices and Rents Are Main Drivers

Bloomberg Economics predicts that both headline and core CPI for April will be “hot,” mainly driven by two factors: First, the Iran war has pushed up gasoline and airfare prices; second, the U.S. Bureau of Labor Statistics (BLS) will revise last October’s data distortions caused by the government shutdown, leading to a one-time jump in rent inflation.

Economists surveyed by Bloomberg forecast that April headline CPI will rise 0.6% month-on-month, lower than March’s 0.9%; core CPI is expected to rise from 0.2% to 0.3% month-on-month. The BLS will release April’s Producer Price Index (PPI) on Wednesday, and import price data will follow on Thursday.

Matt Hornbach pointed out that CPI, PPI, and import price data together form the prediction basis for PCE in different ways, “these are the numbers that really matter to the Fed.”

Extent of Corporate Cost Pass-Through May Be Less Than Expected

Despite expectations for hot inflation data, Hornbach remains cautious about whether costs can be effectively passed on to consumers. He stated that it is still unclear whether companies are passing extra costs to consumers; the extent of pass-through may be lower than previously expected.

Hornbach noted that companies are currently facing broader cost pressures, including rising energy costs and increased investments related to AI infrastructure.

He used Trump’s “Liberation Day” tariffs as an example, noting that many economists expected firms to pass tariff costs to consumers at the time, but the actual pass-through was far less than expected.

Risk Disclosure and DisclaimerThe market involves risks, and investment should be cautious. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article fit their particular circumstances. If you invest accordingly, you are responsible for the consequences. ```