TD Securities forecasts August core CPI at 0.19% m/m and 2.3% y/y, with services expected to provide most of the lift while core goods are seen slightly negative on the month. Headline CPI is projected at 0.37% m/m and 3.4% y/y, reflecting higher energy prices alongside a mild firming in food inflation.
The bank flags upside risk to its CPI call, centred on its assumption of large price declines in tariff-exposed goods such as apparel and household goods. It also points to the first month of PCE incorporating BEA revisions, which it expects to trim y/y core inflation by about 0.2pp, and references respondent commentary in last week’s ISMs as evidence that inflation risks remain present.
Volatility Strategies Around Upcoming CPI Report
As we head into the crucial inflation reports this month, derivative traders should prepare for heightened volatility in interest rate and equity options. With projections pointing to a divergence between a cool 2.3% yearly core CPI and a warmer 3.4% headline CPI, market expectations are likely to swing rapidly. We recommend utilizing short-term straddles on the SPDR S&P 500 ETF (SPY) to capture the inevitable price swings when the official data is released on September 11, 2026.
In the fixed-income space, we should focus on Secured Overnight Financing Rate (SOFR) futures to exploit mispricings between headline and core figures. Currently, CME FedWatch data shows a high probability of a 25-basis-point rate adjustment at the upcoming Federal Reserve meeting. Because the core index remains anchored under 0.2% monthly, any knee-jerk market selloff driven by high energy prices will likely present a prime buying opportunity for short-duration options.
Managing Risks From Supply Chain And Tariff-Exposed Goods
Furthermore, we must account for the upside risks stemming from tariff-exposed goods like apparel and household items, which are highlighted by recent ISM manufacturing data. Implied volatility in consumer discretionary retail options remains underpriced relative to these looming supply-chain pricing pressures. We suggest buying out-of-the-money calls on volatility indices to hedge against a sudden spike in commodity-driven inflation fears.
