TD Securities: US May CPI Expected to Cool Off but Remain Elevated, Limited Downside for Year-to-Date Core Inflation

June 9: TD Securities expects the upcoming May U.S. Consumer Price Index (CPI) report will confirm inflation is cooling but remains stubbornly high. The firm forecasts May’s core CPI monthly rate to fall to 0.23%, while the annual core CPI stays flat at 2.8%. Headline CPI is projected to decline to a 0.4% monthly gain, lifting its annual rate to 4.2%. Looking at the subcomponent breakdown: Commodity prices are expected to rise 0.13% month-over-month in May, in line with the three-month average. Core goods excluding motor vehicles will make up the bulk of this increase, with categories like household products and clothing posting gains. Further declines in used car prices are anticipated to partially offset that rise. Additionally, continued pass-through from oil price shocks and tariff-related effects will push annual core inflation to around 3.0% in June. There is an upside risk to this forecast if aviation fuel costs feed into airline ticket prices more significantly than expected. For the second half of 2026, core inflation is not projected to see a meaningful slowdown. Ex-auto core goods prices will continue to hold firm, while housing costs trend toward normalization at elevated levels.