In March, CP in the United States increased by 8.6% year-on-year, exceeding market expectations and higher than the previous value, setting a record again; Core CP increased by 0.3% month on month, in line with expectations, lower than the previous value of 0.5%. Meanwhile, the median CPI and CP excluding the first 16% continued to rise, with the median rising to 4.91%. Overall inflation far exceeded expectations, and gold and silver rose sharply after the data were released. We have the following views on this inflation data
The sharp rise in energy and food prices is the main reason for the sharp rise in CPI this time. Affected by the rise in crude oil prices, energy prices rose sharply in March, with a month on month growth rate of 11%, much higher than 3.8% in January. The growth rate of food prices remains high at 1%. Since the end of last year, the continuous rise of food prices and the shortage of food supply have led to the rise of overall food prices. The growth rate of core CPI slowed down, especially for core commodities excluding food and energy. The price growth rate dropped significantly, which had little effect on overall inflation. Looking back, the conflict between Russia and Ukraine has eased recently, the space for oil prices to rise rapidly again in the short term is limited, and the role of energy commodity prices in pushing up subsequent CPI is weakened.
Second hand car prices fell sharply, and the supply bottleneck is no longer the main driver of high inflation. Among the core projects, the price of second-hand cars with a large increase in the early stage continued to fall, and the decline continued to expand. The price of second-hand cars fell 38% month on month in March and only 0.2% in February. In terms of new cars, it increased slightly by 0.2% month on month in March, and the growth rate of price rise slowed down. From the current growth rate of automobile prices, "lack of core" is no longer the main reason for high inflation.
The rise in energy prices has spread to the service industry, especially transportation services. In March, the price of the transportation industry increased by 2% month on month, of which the main contribution was air tickets, with a month on month growth of 10.7%. The rise of energy prices combined with the rapid recovery of residents' travel made the price of air tickets rise rapidly. From this observation of inflation structure, the rapid decline of energy prices will also reduce the probability of inflation rising again. It is expected that the inflection point of US inflation from March to April will come.
The interest rate increase rate in May is about 50bp and the continuation table is opened. Before the FOMC meeting in May, there was only one inflation data release. The CP in March exceeded expectations, which will have to force the fed to accelerate the pace of tightening monetary policy. Therefore, the probability of raising interest rates by 50bp in May is expected to be high. The renewal table is expected to be officially carried out in May, and the upper limit will be adjusted continuously. According to the minutes of the meeting released by the Federal Reserve, the monthly reduction of US bonds is 60 billion and MBS bonds is 35 billion US dollars, of which US bonds are expected to reach the upper limit and MBS bonds may not reach the upper limit. With the change of inflation, the probability of subsequent reduction of US debt will continue to increase. At the same time, the overall cycle and time are uncertain. If the US economy declines rapidly, the reduction time may not last long.
