TD Securities Sees US Inflation Cooling, But Core Pressures Persist

TD Securities has released its latest inflation forecast for August, predicting a slowdown in US headline inflation to 2.6% year-over-year, down from 2.9% in July.

The firm's forecast is based on Bureau of Labor Statistics data through July and indicates that energy prices likely provided a downward pull, while shelter costs and services inflation continue to keep core pressures elevated.

Core inflation is expected to remain sticky at 3.2%, with the monthly headline CPI rising by just 0.1% in August, and core CPI increasing 0.2%. The firm notes that while the disinflation trend remains intact, the pace is slow, and the Federal Reserve needs to see more consistent progress before declaring victory.

The upcoming August CPI report on September 13 will be one of the last major data points before the Federal Reserve's September policy meeting, which has markets weighing whether to begin cutting interest rates. TD Securities expects the Fed to hold rates steady in September but sees a growing chance of a cut in December if inflation continues to moderate.