Event:
In March 2022, the CPI of the United States increased by 8.5% year-on-year, the previous value was 7.9%, and the market expectation was 8.4%; After the quarterly adjustment, CPI increased by 1.2% month on month, the previous value was 0.8%, and the market expected 1.2%.
Core CPI increased by 6.5% year-on-year, the previous value was 6.4%, and the market expectation was 6.6%; After the quarterly adjustment, the core CPI increased by 0.3% month on month, the previous value was 0.5%, and the market expected 0.5%.
As of the closing on April 12, the yield of 10-year US bonds fell 2bp to 2.77%, and the three major stock indexes weakened slightly. The S & P 500 index fell 0.34%, the NASDAQ index fell 0.3% and the Dow Jones industrial index fell 0.26%.
Core view:
The CPI of the United States in March was basically in line with expectations. Under the background of the continuing conflict between Russia and Ukraine, higher energy and food prices were the main factors driving the month on month increase of inflation. Under the background of high inflation, the tightening of monetary policy of the Federal Reserve may accelerate, increasing the risk of economic recession in the United States. Therefore, in the process of raising interest rates and shrinking the table, the Federal Reserve will closely track inflation and economic data to assess the impact of raising interest rates on the economy. If inflation slows down and the risk of economic recession continues to rise, it is necessary to reduce the need for radical interest rate hikes.
Inflation pressure continued, and CPI basically met expectations. Gasoline, food and housing were the main contributors to this inflation, but on a month on month basis, ticket prices (+ 10.7%), hotels (+ 3.7%) and medical care services (+ 0.6%) also increased significantly. On the one hand, the risk of European and American sanctions on Russian energy continues to rise. Russia, as a major exporter of crude oil and natural gas, the warming conflict between Russia and Ukraine has led to high fluctuations in oil prices. Looking ahead, considering that the conflict between Russia and Ukraine has not ended and the risk of sanctions is still, it is expected that the oil price will remain in a high fluctuation environment in the first half of the year, which restricts the downward speed of CPI year-on-year growth. On the other hand, Russia and Ukraine are major exporters of wheat, corn and sunflower oil. The conflict between Russia and Ukraine intensifies the problem of supply chain tightening, reduces food supply and raises the risk of further upward food prices.
The Fed's monetary tightening policy may speed up and exacerbate the risk of US economic recession. At this stage, the focus of the Fed's policy has shifted to controlling inflation, and the pace of monetary policy tightening may be accelerated. However, the Fed's accelerated tightening of monetary policy may increase the risk of US recession. First, the interest rate increase leads to the flattening of the yield curve and reduces the willingness of banks to supply credit, which is not conducive to credit expansion. Second, the Fed's interest rate hike will affect the prime rate, which will be further transmitted to the interest rates of housing loans and car loans, dragging down automobile consumption and housing investment. Third, the Federal Reserve raised interest rates, raised corporate financing costs and suppressed the company's equity repurchase, which led to the adjustment pressure on US stocks, further affected the wealth effect of residents, thus curbing consumption and forming negative feedback, which was not conducive to the US economy.
Overall, we believe that under the background of high inflation, the tightening of monetary policy of the Federal Reserve may be accelerated, and interest rates will continue to rise in the first half of the year. There is a high probability that the table will be reduced at the interest rate meeting in May. In the process of tightening monetary policy, the Fed will closely track inflation and economic data to assess the impact of interest rate hikes on the economy. If inflation slows down and the risk of economic recession continues to rise, it is necessary to reduce radical interest rate hikes.
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.
