TD Securities: US Core CPI Momentum Set to Return in July, Signaling Sticky Inflation

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TD Securities: US Core CPI Momentum Set to Return in July, Signaling Sticky Inflation

TD Securities projects that US core CPI momentum will rebound in July, signaling that underlying inflation pressures remain persistent despite recent cooling. The forecast, released this week, indicates a monthly increase of 0.2% for core CPI, reversing the softer 0.1% gain seen in June, which could influence the Federal Reserve’s upcoming policy decisions.

What the Forecast Shows

According to TD Securities’ analysis, the expected acceleration in core CPI is driven by firmness in shelter costs and selected services, partially offset by moderating goods prices. The forecast suggests that while headline inflation may ease, the core measure—excluding food and energy—will maintain a pace consistent with above-target inflation. As of the latest data, core CPI has been running at an annual rate of 3.3%, well above the Fed’s 2% objective.

Market Implications

If July’s core CPI meets TD’s projection, it would reinforce the narrative that the disinflation process is uneven, potentially delaying the Federal Reserve’s timeline for interest rate cuts. Market participants are closely watching this data, as it could alter expectations for the September FOMC meeting. A firmer core reading might prompt the Fed to maintain its current restrictive stance for longer, while a weaker print could open the door for policy easing. This report is therefore a critical input for investors assessing the trajectory of US monetary policy.

Why This Matters for Consumers and Investors

For everyday consumers, persistent core inflation means continued pressure on living costs, particularly in housing and services. For investors, the data influences bond yields, equity valuations, and the dollar’s strength. A surprise to the upside could trigger market volatility, while a downside miss might boost risk sentiment. Understanding these dynamics is essential for making informed financial decisions.

Context and Background

Recent inflation reports have shown a mixed picture: headline CPI has moderated due to falling energy prices, but core measures have remained stubbornly elevated. The Fed has repeatedly emphasized that it needs greater confidence in sustainable disinflation before adjusting policy. TD Securities’ forecast adds to the debate, suggesting that the path to 2% inflation will be bumpy. The upcoming CPI release, scheduled for August 13, will provide the latest evidence on whether this momentum shift materializes.

Conclusion

TD Securities’ projection of a rebound in July core CPI underscores the ongoing challenge of taming inflation. The data will be pivotal for the Federal Reserve’s next move, with implications for markets and households alike. As always, actual figures may diverge from forecasts, and the full picture will emerge with the official release.

FAQs

Q1: What is core CPI?
Core CPI measures the change in prices for goods and services, excluding food and energy, providing a clearer view of underlying inflation trends.

Q2: How does core CPI affect Federal Reserve decisions?
The Fed targets 2% inflation, and core CPI is a key indicator. Persistent high core readings may prompt the Fed to keep interest rates higher for longer to cool demand.

Q3: When will the July CPI data be released?
The US Bureau of Labor Statistics is scheduled to release the July CPI report on August 13, 2025, at 8:30 AM ET.

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