The Zhitong Finance App learned that CITIC Securities released a research report saying that the US CPI in September exceeded expectations, the core was once again biased from month to month, the details of price increases were broad, and the inflation rate did not “fall fast enough to the target.” The bank still expects the Federal Reserve to raise interest rates once more during the year, that is, a further 25 bps rate hike in December after being put on hold in October. In an environment where oil prices remain high and inflation remains sticky, it is difficult for US financial conditions to be meaningfully relaxed, US dollar liquidity is expected to remain tight, US bond interest rates have no clear downside, gold sentiment is still weak, and fundamental resilience is more important than liquidity odds.
CITIC Securities's main views are as follows:
Note: The US CPI readings for September were high. Overall, for example, the period rose 0.6% (previous value 0.4%), the core rose 0.3% month-on-month (in line with the previous value), the overall year-on-year increase was 3.7% (previous value 3.4%), and the core rose 2.6% year over year (previous value 2.4%). The latter three each exceeded expectations by 0.1 percentage points.
The core is once again hot month-on-month, and the details of price increases are broad.
Among the 0.6% month-on-month increase in overall US CPI in September, the contributions of energy, food, core commodities, and core services were 37.7 bps, 0.6 bps, 4.7 bps, and 22.3 bps, respectively. The impact of the increase in refined oil prices on the rise in US inflation was obvious. Core CPI has been rising for three consecutive months after taking two decimal places. Although super core inflation fell slightly to 0.42% from the previous value of 0.51%, the details of the price increase in September are quite broad, which is an unideal performance. The contribution of the residential sector to the core month-on-month growth rate rose from the previous value of 11 bps to 18 bps. Healthcare services, leisure services, transportation services, clothing, used cars, leisure products, and information technology products are all accelerating month-on-month. Telephone service items, which previously caused the core CPI to exceed expectations, fell from 5.4% to -0.1% month-on-month, indicating that the price increase was indeed only temporary, but the core month-on-month reading, which exceeded expectations for two consecutive months, inevitably makes people question whether the stickiness of US inflation has weakened sufficiently.
US inflation has not “fallen fast enough to target,” and the Federal Reserve is expected to raise interest rates by another 25 bps during the year.
The Middle East conflict still has no clear path to cooling down. Oil prices remain high, and core inflation is once again disappointing. This may reinforce central bank officers' concerns about prolonged high inflation. The bank still expects the Federal Reserve to raise interest rates by another 25 bps during the year. Judging from the statements of FOMC members who have the right to vote this year since this month, apart from Logan's hawkish belief that interest rate hikes of at least 50 bps are needed, Jefferson, Williams, Bowman, and Waller are all downplaying expectations of continuous interest rate hikes. Hamak remains open about the pace of interest rate hikes, and Kashkari is also open and expects to raise interest rates “once more” during the year. The bank believes that these statements mean that the Federal Reserve is more likely to stay on hold in October and then raise interest rates by 25 bps in December.
The liquidity of the US dollar is expected to remain tight, and fundamental resilience is more important than liquidity odds.
At a level where the current price of oil is slightly above $100 per barrel, which is neither sufficient to generate recessionary expectations, but is sufficient to deepen concerns about inflation, it is difficult to meaningfully ease US financial conditions. Liquidity contraction expectations will need to wait at least until the next CPI announcement or when the situation in the Middle East becomes clear before it clearly weakens. The bank believes that although interest rates on US bonds jumped first after the CPI was announced, and there are signs of peaking recently, the downside has not yet been clearly opened, and the gold trading logic is still weak. Waiting for the situation in the Middle East to become clear before the right-side layout is a better choice. The recent strong performance of the US dollar index is due not only to rising expectations of austerity, but also to France's financial difficulties. The bank does not believe that its upward trend will continue for too long, but it believes that it may fluctuate at a high level. The recent rise in the US stock market has been narrow and volatile, and there is a phased risk of style rebalancing. However, given the resilience of the US economy, US stocks are still a major type of asset that is relatively easier to forge consensus, so it is possible to consider a layout where sentiment is digested.
Risk factors: The evolution of the situation in Iran or the impact of other events exceeded expectations; overseas economic and inflation performance exceeded expectations; Federal Reserve decisions exceeded expectations; changes in global market liquidity or sentiment exceeded expectations, etc.