Oscar Munoz and the TD Securities US macro team judge that, although core CPI surprised on the soft side and tariff pass-through moderated, it is too early for markets to extrapolate a dovish signal. They expect core inflation to firm again in April on airfares and shelter, and still project two 25 bps Federal Reserve cuts in the second half of 2026 as inflation normalizes.

Soft core CPI but cuts still seen in 26H2

"Tariff pass-through moderated today after firmer Jan and Feb data, with the CPI's supercore slowing to 0.18% m/m—a four-month low."

"We expect this to translate into a softer core PCE at 0.23% m/m in March."

"We think it is too early for the market to run with today's positive signal from the core CPI given the strong start to the year for consumer prices—along with the forming clouds that will surely rain on core inflation in coming months."

"Strengthening airfares and the delayed payback from an unusually soft October shelter will lift the core CPI in April."

"We still see room for two 25 bps rate cuts in 26H2 on inflation normalization."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)