nowcasting Tomorrow’s CPI is 1.1% m/m (Cleveland Fed) vs. Bloomberg consensus of 1.2%. This compares to a core CPI immediate forecast of 0.52% and a consensus of 0.5%. The huge gap is largely attributable to gasoline prices, which rose 20% in March (all grades) despite the CPI weight for gasoline being only 3.8%. What’s the price of gasoline in April? It will depend on oil prices.
figure 1: Gasoline prices, all formulations, USD/gallon (blue, left scale), oil price (Brent), USD/barrel (red, right scale). Source: Fred.
Gasoline prices are already falling.
The regression of gasoline price on oil yields a coefficient of 0.027, which means that every dollar change in Brent crude oil price means gasoline price rises by 2.7 cents – not far from that Jim estimates 2.5 cents.
Brent crude oil averaged $117.25 in March, while today’s price is around $100. If prices remain at that level in April, gasoline prices in April would be down about 47 cents from March’s $4.22/gallon.
Futures are at a discount, so forward futures are cheaper than near-term futures.
