Oversea-Chinese Banking(US:OVCHY) Xin Hua Cai Jing·2025-05-15 02:42Core Viewpoint - OCBC maintains its expectation of three rate cuts in 2023, each by 25 basis points, but delays the first cut from Q2 to Q3 due to the current economic conditions [1][4]. Inflation Trends - The U.S. Consumer Price Index (CPI) rose by 0.2% month-on-month in April, lower than the expected 0.3%, with the year-on-year increase in overall CPI decreasing from 2.4% to 2.3% [2]. - Housing prices increased by 0.3% month-on-month, contributing to over half of the overall increase, while energy prices rose, offsetting declines in gasoline prices [2]. - Core CPI year-on-year growth remains at 2.8%, indicating persistent inflation in core services, while core goods prices have turned positive with a growth of 0.13% [2]. Labor Market Insights - The labor market shows signs of cooling, with non-farm payrolls increasing by 177,000 in April, which is above market expectations but not robust [3]. - The unemployment rate remains at a cyclical high of 4.2%, and average hourly earnings increased by only 0.2% month-on-month [3]. - The job vacancy rate fell to 4.3%, indicating a gradual easing of labor market tightness, with the job-to-unemployment ratio dropping to 1.02, suggesting potential impacts on unemployment if vacancies continue to decline [3]. Market Expectations - Market concerns about a U.S. recession have significantly eased, with the probability of recession dropping from 65% in early April to 38% currently [4]. - Interest rate futures reflect a cooling of rate cut expectations, with only 54 basis points of cuts priced in for the year, down from over 100 basis points in April [4]. - The expectation for a rate cut at the June FOMC meeting has been fully priced out, with only a 40% chance of a 25 basis point cut in July [4]. Treasury Yield Predictions - OCBC has slightly raised its forecast for U.S. Treasury yields due to the delayed rate cut expectations and improved market sentiment, but maintains a medium-term outlook of moderate decline [5]. - The report emphasizes that while the U.S. economy is not in a full recession, there are clear signs of slowing growth and persistent core inflation [5]. - Future economic data will be closely monitored, particularly regarding labor market conditions and service inflation, which could trigger policy adjustments [5].