TD Securities has released a new forecast indicating that US core consumer price index (CPI) momentum is poised to rebound in July, reversing the softer gain seen in June. The analysis, published this week, projects a 0.2% monthly increase in core CPI—which excludes volatile food and energy prices—up from June’s 0.1% rise. This expected acceleration could reinforce the narrative that underlying inflation remains sticky, complicating the Federal Reserve’s policy calculus.
According to the bank, persistent firmness in shelter costs and selected services is driving the rebound, while moderating goods prices partially offset the pressure. As of the latest readings, core CPI has been running at an annual rate of 3.3%, well above the Fed’s 2% target. Should July’s data align with TD’s projection, it would signal that the disinflation process is uneven and could delay the timeline for interest rate cuts.
Market participants are closely monitoring this data point, as a firmer core reading might prompt the Federal Reserve to maintain its restrictive monetary stance for longer, dampening expectations for a pivot at the September FOMC meeting. Conversely, a softer print could open the door for policy easing. The upcoming Bureau of Labor Statistics report, scheduled for August 13, will be pivotal for investors assessing bond yields, equity valuations, and the dollar’s trajectory.
For consumers, sticky core inflation means continued strain from housing and service costs. Investors, meanwhile, face potential volatility: an upside surprise could trigger risk-off sentiment, while a downside miss might boost appetite for risk assets. The forecast underscores the challenge of returning inflation to target and highlights the data-dependent nature of near-term Fed decisions.
