I. China's new social finance in February was significantly lower than expected, which increased the market's expectation of the central bank's interest rate cut on March 15, but we don't expect the central bank to cut interest rates again. China added 1190 billion yuan of social finance in February, far lower than the expected value of 221.57 billion yuan. Affected by this, the yield of 10-year Treasury bonds fell by about 6BP last Friday, reflecting that the market has certain expectations for the central bank to cut interest rates again. We believe that the central bank has little probability of cutting interest rates. First, the core reason for the weakness of new social finance is the weakness of real estate. On the one hand, the weakening of housing sales leads to the negative increase of housing loans; On the other hand, the weakness of real estate has dragged down the growth of medium and long-term loans of enterprises. Second, there is no need to cut interest rates to stabilize real estate, which can be achieved by reducing the mortgage interest rate and increasing the points due to urban policies. At present, China's average mortgage interest rate is about 100bp higher than the five-year LPR. Considering the low risk of housing loan, the housing loan interest rate can be reduced to the level of 5-year LPR, or even slightly lower than 5-year LPR. Of course, the keynote of the property market policy is still based on the city. Not all cities need to reduce the mortgage interest rate. The reduction of mortgage interest rate will not be achieved in one step. Third, at present, China's policy interest rate is already low, and there is little room for interest rate reduction. On March 16, the Federal Reserve is expected to raise interest rates by 25bp and several times during the year. Overseas interest rate hikes also have certain constraints on China's interest rate cuts.
II. The market has full expectations for the fed to raise interest rates by 25bp on March 16, and it is expected that the Fed will not act beyond expectations. The Fed chairman's latest speech shows that the Fed will raise interest rates by 25bp at its March meeting, but it does not rule out raising interest rates by 50bp at one or more meetings in the future. The negative impact of the situation in Ukraine on the United States is one of the reasons why the Fed is not inclined to raise interest rates by 50bp at the March meeting. On the other hand, the Federal Reserve has expectations for the weakening of US inflation pressure in the second quarter. If this expectation is fulfilled, the federal reserve tends to gradually raise interest rates in a relatively gentle way, that is, the range of each interest rate increase is no better than 50bp, so as to reduce the impact of interest rate increase on the US economy and financial markets.
III. We believe that the inflationary pressure in the United States will not ease significantly within this year. In the future, the Fed may raise interest rates by more than expected, such as 50bp at one or more meetings. Us CPI rose 7.9% year-on-year in February, reaching a new high. Excluding energy and food, core CPI rose 0.7% month on month in February, and the increase is still at a very high level. From the breakdown data, the price rise in the United States is more widespread. In addition to energy and food, the prices of housing, clothing, transportation, entertainment and other categories increased higher month on month. The recent deterioration of the situation in Ukraine has led to a sharp rise in the prices of energy and some commodities. This will increase inflationary pressure in the United States in the coming months. More importantly, the labor market in various industries in the United States is relatively tight. According to the latest data released, the number of non-agricultural job vacancies in the United States in January was as high as 11.26 million, 57.3% higher than before the epidemic. This indicator has been at a high level since last July. According to industry data, the number of job vacancies in manufacturing, construction and various service industries in the United States is high. This means that there is significant wage pressure in all industries. This will promote the sustained and rapid rise in the prices of various goods and services. In order to curb inflation, the Fed may raise interest rates by more than expected in the future, such as 50bp at one or more meetings.
Risk tip: China's steady growth is less than expected, and the situation in Ukraine is deteriorating
