US CPI: Core strength and curve implications – TD Securities

TD Securities’ Global Strategy Team expects US core CPI to rise 0.42% month-on-month in January, above the 0.3% consensus, with headline CPI at 0.30%. They attribute the strength to start-of-year price hikes, post-shutdown normalization and tariff passthrough, and see services as the main driver while projecting core CPI to hold at 2.6% year-on-year.

Core inflation seen outpacing consensus

"We look for core inflation to jump to 0.42% m/m (cons: 0.3%), with the headline CPI posting a softer 0.30% gain (cons: 0.3%). Our strong core forecast owes to a combination of start-of-the-year price hikes, residual post-shutdown normalization, and tariff passthrough."

"As has been the case in the post-pandemic period, we look for robust January inflation to be driven by a firmer services segment rather than through meaningfully higher goods prices."

"We project the core CPI stayed unchanged at 2.6% on a y/y basis while the total measure likely fell 0.2pp to 2.5%. We see the risks to our forecasts skewed to the downside since the recent core CPI prints have tended to come in below our projections of firmer inflation."

"Note that our CPI NSA forecast at 325.531 is a whisker above the market's current fixing at 325.465."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)