On February 16, the CITIC Securities Research Report pointed out that the year-on-year reading of U.S. inflation in January continued to fall but at a slower pace, and the overall CPI rebounded month-on-month, which was basically in line with expectations. Inflationary pressures still persist, but the transmission momentum of “wage-price” has not strengthened. The annual weight adjustment does not significantly change the CPI reading, and its impact should not be over-interpreted.
The downward trend of U.S. inflation is relatively certain, but one should not be too optimistic about the rate of inflation decline and the loose liquidity of the Fed. We expect the Fed to pause interest rate hikes at around 5.25%, and the probability of rate cuts within the year is relatively limited. Market volatility may increase in the near future, and we still need to be alert to the impact of the rebound in the US dollar index and US bond interest rates.
