Event: the United States released the latest inflation data in January. Among them, CPI increased by 7.5% year on year, 0.6% month on month, core CPI increased by 6.0% year on year and 0.6% month on month, all exceeding market expectations.
Core conclusions:
\u3000\u30001. The main reason why the CPI of the United States rose sharply in January and exceeded market expectations was that the two items of energy and core commodities increased significantly year-on-year, superimposing the base effect, driving inflation to a new record high. However, the two indicators increased by 0.6% month on month, both unchanged from the previous period, indicating that their rising momentum is declining, and US inflation may peak in the first quarter. However, the continuous rise and firmness of core CPI means that inflation may fall slowly and the duration of inflation will exceed expectations. Affected by this, the Fed may accelerate its monetary tightening process, but the specific strength still depends on the trend of inflation.
\u3000\u30002. Specifically, due to the sharp rise in global energy prices during the epidemic and the bottleneck of the global supply chain, energy (year-on-year + 27%) and core commodities (new cars + 11.7% year-on-year and used cars + 40.5% year-on-year) in the US CPI increased significantly. However, the month on month growth momentum of energy and core commodities has slowed down in January, and US inflation is about to peak. However, at present, service consumption has not returned to the pre epidemic level, and the rapid rise of wages in the United States will drag down the decline of US inflation and continue to exceed the policy objectives of the Federal Reserve.
1) in terms of energy, in January, the electricity price increased by 4.2% month on month and the fuel price increased by 9.5% month on month, which is reflected in the rising travel demand of residents after the epidemic is controlled, and the continuous rise of energy prices drives the rise of relevant prices. It is expected that there is limited room for subsequent rise.
2) in terms of core commodities, the price of used cars rose by 1.5% month on month in January, down 1.8 percentage points from the previous month, while the U.S. Mannheim used vehicle value index rose by only 0.04% month on month in January, which means that the price of used cars will stabilize. In terms of new cars, the price of new cars remained unchanged month on month in January, down 1.2 percentage points from the previous month. After the bottleneck of the supply chain is alleviated, the price of new cars is expected to continue to fall. This means that the main factors driving inflation in the past year tend to weaken, and US inflation will peak.
3) in the core CPI data, the price of core services in January increased by 0.4% month on month, 0.1 percentage point higher than that of the previous month, among which the recovery of transportation is the most obvious, indicating that after the epidemic is controlled, the restart of the service industry drives the rise of relevant service prices. In December, the Atlanta Fed's wage growth index rose by 4.5%, and the rise in income combined with the controlled epidemic accelerated the drive of American residents to shift from commodity consumption to service consumption. Recently, the prices of American air tickets and hotels have begun to rise. Considering that the US service consumption is still far from returning to the pre epidemic level, the price of the service industry is expected to continue to rise, slowing down the decline of inflation, and the inflation level may continue to exceed the policy target of the Federal Reserve.
\u3000\u30003. At present, the US labor market is close to full employment, and the Federal Reserve will "feel" inflation and raise interest rates. Under standard circumstances, inflation will slow down after peaking, and the Federal Reserve will raise interest rates three times a year. However, if inflation continues to rise, the Fed will have to accelerate the tightening process, raise interest rates 4-5 times a year, and shrink the table faster. In January, the United States had 467000 non farm jobs, which greatly exceeded market expectations, and the labor participation rate rebounded to 62.2%. The U.S. labor market may be close to full employment. Therefore, the impact on the pace of Fed action in 2022 will depend on the inflation situation in the United States and China. Powell said at the FOMC press conference in January that interest rates may be raised at each meeting, and the intensity is uncertain. Perhaps it is the need to constantly assess the inflation risk in order to maintain the flexibility of monetary policy. At present, the momentum of inflation in the United States is slowing down. Under standard circumstances, the Federal Reserve will maintain its original tightening rhythm, raise interest rates three times a year, and shrink the table in order. However, if extreme circumstances occur, US inflation has been at a high level and fell slowly, resulting in inflation continuing to exceed expectations. The Federal Reserve may accelerate tightening, raise interest rates 4-5 times a year, and shrink the table with faster efforts. It will exert great pressure on US stocks and promote the US bond yield to continue to rise to more than 2%.
Risk tips
International tensions triggered higher than expected inflation, and the covid-19 epidemic situation deteriorated significantly.
