TD Securities: US Economy Remains Strong Amid Lower Inflation Revisions

TD Securities economists Oscar Munoz and Eli Nir have assessed recent US data revisions, finding them broadly supportive of a firm macro backdrop and still-hawkish Federal Reserve stance. The economists highlighted robust US growth, sticky inflation, and upgraded GDP forecasts, arguing that lower inflation revisions do not materially alter the narrative for the US Dollar or Fed policy expectations.

The PCE and GDP revisions were a mixed bag with hawkish backward adjustments to growth and dovish adjustments to inflation. However, Munoz and Nir emphasized that the underlying trend is key, and robust growth with rising inflation risks should continue to dominate the Fed's outlook.

TD Securities still expects the Fed to lift rates in October, but notes a more gradual approach cannot be ruled out. The economists believe the message remains hawkish on net, with underlying growth solid and inflation remaining sticky.