Rising oil prices linked to the ongoing Middle East conflict are keeping U.S. inflation stubbornly high, complicating the Fed’s path to lower interest rates. TD Asset Management’s VP and Director for Active Fixed Income Portfolio Management, Hafiz Noordin, explains why energy-driven price pressures are pushing bond yields higher and could delay meaningful rate relief.
Anthony Okolie: The latest US inflation report shows that the impact of the conflict in the Middle East is beginning to be felt, with higher energy and airfare costs pushing annualized CPI to its biggest gain since May 2023. Joining us now to discuss what it all means for interest rates and the bond market is Hafiz Noordin, Vice President and Director for Active Fixed Income Portfolio Management with TD Asset Management.
Hafiz, thanks for joining us.
Hafiz Noordin: It's great to be here.
Anthony Okolie: Alright. So we've got US inflation rising in April. What were your big takeaways from the report?
Hafiz Noordin: So it was a bit of a beat, a bit of a higher inflation print compared to consensus expectations. So we saw a 3.8% year-over-year inflation rate in the US. The market was expecting around 3.7%-- also the same on the core inflation. So core CPI, which strips out food and energy, which tend to be the more volatile components, also was a bit higher-- 2.8% year-over-year. Expectations were for 2.7%.
Anthony Okolie: So, well above the Fed's 2% target.
Hafiz Noordin: That's right. So we've been talking a lot about sticky inflation. So it's stickier for longer, right? And so that, obviously, is an issue-- and it's not just about the energy component, but there is still this broad-based sticky inflation in the US economy. And so that's going to keep going on.
And I think what we're seeing, then, is
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