US: PCE seen re‑accelerating into 2026 – TD Securities

TD Securities forecasts PCE inflation to firm in December, with core PCE at 0.25% m/m and headline at 0.27% m/m, translating to 2.9% and 2.8% y/y respectively. Core CPI is expected to peak around 2.8% y/y in Q2 2026 as higher tariffs lift prices, before sticky inflation in H1 gives way to gradual disinflation in H2 2026.

Tariffs lift prices before disinflation

"PCE inflation likely accelerated in December. We expect core PCE advanced 0.25% m/m due to both stronger goods and services. We look for supercore PCE to go essentially sideways at 0.26% m/m."

"Headline will be a tad stronger at 0.27% owing to an acceleration in food prices. Our forecast translates to 2.9% and 2.8% y/y for core and headline, respectively."

"January CPI last week was the first step towards the Fed gaining confidence in the inflation outlook. Core CPI did not accelerate as much as expected, particularly services. However, a good portion of strength did not pass through into our expectation for PCE inflation."

"Significantly higher tariffs should lead to a boost in consumer prices in the near term. We expect inflation to move higher: We see core CPI inflation peaking at 2.8% y/y for Q2 2026. The numbers are similar in core PCE terms."

"However, we expect sticky prices in H1 to turn to gradual disinflation in H2 2026."

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