Fed Hints at Hold as TD Securities Sees Subdued August CPI

TD Securities economists Oscar Munoz and Eli Nir expect the upcoming August Consumer Price Index (CPI) report to show subdued inflation numbers, which would keep the Federal Reserve on hold in September. According to them, the CPI-to-PCE translation will also point to contained underlying inflation.

In a recent statement, Governor Waller emphasized his preference for keeping interest rates on hold as long as possible, provided that inflation data allows it. However, he also stressed the importance of the August CPI report.

Munoz and Nir forecast that if their expectations materialize, core Personal Consumption Expenditures (PCE) would be a modest 0.18% month-over-month, with market-based figures being even more subdued at 0.13%. They believe this would be a welcome number for centrist members of the Federal Open Market Committee (FOMC), such as Waller and Williams.

The TD Securities economists anticipate that the Fed will remain on hold over their forecast horizon, citing stabilized labor markets and high inflation rates for the rest of the year. They caution that if the Fed does decide to move, a rate hike is more likely than a cut.