CICC: Inflation exceeds expectations, urgency of Fed rate cut decreases

On January 12th, Zhongjin Research Report pointed out that the US December CPI increased by 3.4% year-on-year (previous value: 3.1%), and core CPI increased by 3.9% year-on-year (previous value: 4.0%), both higher than expected. We believe that the general direction of inflation in the United States is still slowing down, but there is a great deal of uncertainty in the pace, which means that the monetary policy of the Federal Reserve will be full of variables. If the Federal Reserve turns to easing too early, it may lead to a rebound in already strong demand and increase risks of "no landing" and "secondary inflation" for the economy. Therefore, investors should be more cautious about expectations of interest rate cuts, and it is possible that the Federal Reserve will not cut rates in March as hoped by the market; expectations for six rate cuts throughout the year may also be too aggressive.