Food inflation continues to heat up
The retail inventory sales ratio of food and beverage stores in the United States has not recovered to the level before the epidemic since the epidemic, and has continued to decline since 2021. The shortage of food inventory in stores caused by tight supply is the main reason for the rise of food prices. Food supply has been affected in many ways, including the decline in crop production caused by extreme weather in 2021 and the shortage of labor supply caused by the pandemic.
International oil prices affect changes in energy prices
The recent international geopolitical conflict has greatly increased the global expectation of oil supply tightening. However, the continuous increase of shale oil production capacity in the United States can relatively alleviate the rise of oil prices in the future. The trend of international oil price remains to be observed, and the trend of CPI energy sub item remains to be determined.
The short-term easing pressure on housing prices is relatively large, and the Fed's table contraction will bring improvement
During the pandemic, the increase of residents' demand for living alone and the increase of residents' transfer payment income have increased the rent price. Generally speaking, the rental vacancy rate in the United States is often about 6 months ahead of the residence CPI. Due to the continuous decline of rental vacancy rate, the rental price is expected to remain high in the short term.
Since 2022, the market's expectation of the Fed's accelerated table contraction has increased, and the mortgage interest rate began to rise. In the future, if the Fed accelerates the process of shrinking the table, it is expected to cool house prices and curb the rise of rent prices.
Used car prices or inflection point
With the reopening of social activities, the bottleneck of the supply chain has been alleviated, the production capacity of new cars has been restored, and the supply side has been continuously improved. Meanwhile, car rental prices have fallen from the high point from March to may 2021, indicating that car rental companies have insufficient power to expand the purchase of rental cars, and some demand for new and used cars has weakened.
It is expected that the month on month growth rate of new and used cars will decline steadily. Due to the large month on month growth rate of used cars from April to June 2021, according to the base effect, the year-on-year growth rate of used cars is expected to have an inflection point in April this year.
Spy on the rate hike of the Federal Reserve in March
As of February 21, 2022, the probability of 25bp interest rate increase in March reflected by the federal funds target interest rate futures is 78%, and the probability of 50bp interest rate increase is 22%.
Although the overall comments of Fed officials have been partial to hawks recently, only St. Louis Fed chairman Brad clearly proposed to raise interest rates by 50bp for the first time in March. In addition, the newly added hawkish information has not been reflected in the FOMC minutes in January, only indicating that the interest rate will be increased in March, and the pace of interest rate increase will exceed the interest rate increase cycle in 2015. Therefore, the possibility of the Fed raising interest rates by 25 or 50 BP in March has not been determined.
Referring to the interest rate increase cycles in the United States after 2000, they are relatively mild. They have never started a round of interest rate increase cycle with 50bp, and there is only a 50bp interest rate increase in May 2000. Opening the interest rate increase cycle with a moderate interest rate increase is conducive to increasing the space for subsequent monetary policy adjustment, and the Fed is more inclined to raise interest rates by 25bp in March.
Overall, the Fed is more likely to raise interest rates by 25bp in March. It is expected that the Fed's next tightening process will mainly refer to the subsequent economic data. We do not expect the tightening monetary policy of the Federal Reserve to lead to a "hard landing" of the economy.
Risk tip: the impact of the outbreak of overseas epidemic on the economy is higher than expected, the global commodity prices rise again, and the extreme climate has an impact on the global supply chain
