United States: Core CPI trend seen moderating – TD Securities
TD Securities’ US economics team led by Oscar Munoz, with Eli Nir, Gennadiy Goldberg and Molly Brooks, expects September Core CPI to slow to 0.20% month-on-month, driven by softer core services and supercore. Core goods and shelter are seen rebounding slightly, leaving year-on-year Core CPI broadly sideways at 2.4%, with upside risks from discretionary services and AI-related goods.
Core inflation profile and risks
"We expect September core CPI to moderate to 0.20% m/m. The moderation should be led by supercore at 0.24% after August inflation was pushed up by the segment. Core goods will likely pick up slightly due to vehicle prices, and shelter inflation should rebound slightly higher after a weak August."
"Our forecast would result in y/y core CPI going sideways at 2.4%. We see risks to the upside, with the potential for more strength from discretionary services or AI-related goods."
"We expect core services inflation to edge lower to 0.22% m/m due to a weaker supercore. Weakness will be slightly offset by a subtle rebound in shelter. Discretionary services will also provide a pocket of strength, with a 1.4% and 2.1% increase in lodging and airfares, respectively."
"All in, our forecast would translate to 0.23% m/m core PCE, which is only slightly lower than the 0.25% increase in August. With the Fed having already established a more gradual hiking cycle, we do not expect the September reading to impact the outlook significantly. Core services would still be elevated, despite the moderation from August, which on the margin would maintain the Committee's level of concern around inflation risks."
"We expect the core segment to end 2026 at 2.7% y/y after bottoming at 2.4%. Headline will likely move gradually higher as well to end 2026 at 3.9% after peaking in May at 4.2%, but its evolution will remain entirely dependent on the resolution of the Middle East conflict. We expect inflation progress to resume by the middle of 2027."
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