TD Securities economists anticipate that US inflation data for April will show firming trends, with both core and headline Consumer Price Index (CPI) readings expected to rise. According to their analysis, core CPI is projected to increase by 0.38% month-over-month (2.8% year-over-year), primarily due to a rebound in rent and Owners' Equivalent Rent (OER) prices, which had been unusually subdued in October following the government shutdown [1]. Headline CPI is forecasted to post a stronger 0.56% month-over-month (3.7% year-over-year) gain, driven by elevated gasoline prices and a rebound in food prices after a flat March [1].
The economists note that the April CPI will again reflect the impact of the recent oil shock, with some core components exhibiting second-round effects [1]. They also highlight that higher energy prices and persistent tariffs are expected to further boost consumer prices in the near term [1].
With risks of a labor market downturn subsiding, the focus is shifting towards the Federal Reserve's inflation mandate. TD Securities suggests that this environment will make it challenging for the incoming Fed Chair Warsh to implement rate cuts [1]. They project that core CPI will peak in the second quarter of 2026 before a gradual disinflation trend resumes, which will influence expectations for the US Dollar and Treasury yields [1].
CONCLUSION
TD Securities forecasts a firmer US CPI for April, driven by energy and shelter costs, and expects inflation to remain elevated in the near term. This outlook suggests limited scope for Fed rate cuts in the immediate future, with market attention turning to inflation dynamics and their impact on the Dollar and yields.