Svmuu reported that a research note from CICC stated that recent U.S. inflation data has come in above expectations multiple times, while the job market has stabilized. Bond selling has occurred, and market concerns about inflation continue to heat up. Meanwhile, the U.S.-Iran peace talks have made no substantive progress, and the Strait of Hormuz remains effectively closed, making the upside risk to energy prices difficult to dissipate. Under the baseline scenario, we expect U.S. PCE inflation to remain above 3.5% for the full year, and core PCE inflation to be above 3%, both significantly higher than the Federal Reserve's 2% policy target.
Against this backdrop, the Federal Reserve's policy stance is set to become more cautious, and it may be difficult to cut interest rates further this year (previously, the next rate cut was expected in the fourth quarter). After new Chairperson Warsh takes office, establishing policy credibility will be the top priority. Timely communication of a clear anti-inflation signal to the market is both a necessary measure and essential for stabilizing expectations. For the market, this means the probability of a marginal tightening in dollar liquidity is rising, and assets driven purely by liquidity could continue to face pressure. (Jin Shi)