TD Securities strategists expect April United States (US) Consumer Price Index (CPI) to show firmer inflation, with core CPI seen at 0.38% m/m and 2.8% y/y, and headline at 0.56% m/m and 3.7% y/y. The rebound in shelter and higher airfares linked to Oil are key drivers, while core inflation is projected to peak near 2.9% in Q2 before gradually easing.

Shelter rebound and airfares drive core

"We look for core inflation to rise to 0.38% m/m, largely owing to the rebound in shelter prices after the government shutdown kept the segment atypically subdued in October. The ongoing oil shock should also manifest in the core through stronger-than-usual airfares."

"We expect headline CPI to post a firmer 0.56% m/m gain owing to a ~5% increase in gasoline prices. Food inflation likely rebounded as well after printing flat in March. We project the core CPI rose to 2.8% on a y/y basis, with headline inflation moving north by another 0.4pp to 3.7%—a three-year-high. We see the risks to our forecasts skewed to the upside in the event pass-through from jet fuel prices to airfares is larger than we are assuming."

"Following the rebound from the gov't shutdown and the ongoing oil-price shock we anticipate the core segment will peak at 2.9% in Q2—though the ongoing Iran conflict provides upside risks to our forecast. We remain of the view that gradual disinflation should be in the cards as a possible scenario toward the end of the year."

"We expect headline CPI rose 0.56% m/ m in April, with the energy component continuing to act as a catalyst for the move higher. Food inflation likely rebounded after printing flat in March. Note that our CPI NSA forecast at 332.714 is slightly below the market's current fixing at 332.780."

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