Event:
In February 2022, the CPI of the United States increased by 7.9% year-on-year, the previous value was 7.5%, and the market expectation was 7.9%; After the quarterly adjustment, CPI increased by 0.8% month on month, the previous value was 0.6%, and the market expected 0.8%.
Core CPI increased by 6.4% year-on-year, the previous value was 6%, and the market expectation was 6.4%; After the quarterly adjustment, the core CPI increased by 0.5% month on month, the previous value was 0.6%, and the market expected 0.6%.
As of the closing on March 10, the yield of 10-year US bonds rose 5bp to 1.99%, and the stock index fell across the board. The S & P 500 index fell 0.43%, the NASDAQ index fell 0.95% and the Dow Jones industrial index fell 0.34%.
Core view:
The CPI of the United States in February was in line with expectations year-on-year and month on month. Gasoline, housing and food were the main contributors to this inflation, but the increase of air tickets, hotels, clothes and other categories was also significant.
The conflict between Russia and Ukraine triggered a surge in crude oil prices and raised concerns about the risk of stagflation. Next, the trend of inflation will depend on the height and duration of oil prices. Looking ahead, controlling inflation remains the Fed's top priority. If the situation in Russia and Ukraine gets better and oil prices only soar briefly, based on the trade-off between inflation and economic growth targets, the Federal Reserve may raise interest rates ahead (it is expected to raise interest rates by 25bp in March) to curb demand and control inflation, and slow down the pace of interest rate hikes in the second half of the year to ensure policy support for economic recovery. If oil prices continue to rise and remain high, it will delay the peak of US inflation and raise the Fed's expectation of long-term interest rate hike.
Inflationary pressure continued, and CPI was in line with expectations year-on-year and month on month. The CPI of the United States in February 2022 was in line with market expectations year-on-year and month on month. Gasoline, housing and food were the main contributors to this inflation, but air tickets, hotels, clothes and other categories also increased significantly. Looking ahead, if the situation in Russia and Ukraine is controllable, the impact of oil prices on inflation will be limited. However, if oil prices continue to rise, CPI is expected to have further upward space in March.
Under the conflict between Russia and Ukraine, how does oil price affect inflation? The trend of inflation will depend on the height and duration of oil prices. At this stage, the fluctuation of market sentiment caused by geographical conflict is the main line affecting the oil price. With the conflict gradually controllable, the oil price trend will return to $80-100 / barrel, and its impact on inflation is limited. We maintain the view that inflation peaked in the first quarter and fell in the second quarter. However, if the Russian Ukrainian negotiations fail for a long time, leading to the escalation of the Russian Ukrainian war in the future, the oil price will remain at a high level of more than $110 / barrel, and there is the possibility of rising to $120140 / barrel. In this case, the peak of US inflation will be delayed to the second quarter, raising the Fed's expectation of long-term interest rate hike.
Does the conflict between Russia and Ukraine change the Fed's monetary policy path? At this stage, controlling inflation is the primary task of the Federal Reserve. From the perspective of inflation, if the situation in Russia and Ukraine gets better and the later return of oil price to fundamentals is a high probability event, the impact of oil price on inflation is limited. From an economic perspective, when determining the pace of monetary policy tightening, the Federal Reserve needs to carefully weigh inflation and economic growth targets to avoid a "hard landing" of the economy due to interest rate hikes. It is expected that the Federal Reserve will slow down the pace of economic growth based on the 25bp interest rate increase in the second half of the year, which is expected to be supported by the 25bp interest rate increase in the face of a certain trade-off between controlling inflation and controlling inflation in the second half of the year.
Risk warning: the change of global inflation is higher than expected; The conflict between Russia and Ukraine exceeded expectations, and the change of the epidemic situation exceeded expectations.
