Group 1 - The core viewpoint is that the US August core PCE year-on-year is expected to be 2.9%, indicating inflation remains on a stable trajectory but still above the Federal Reserve's 2% target [1] - Market attention is focused on the impact of service and goods inflation on the data, with service inflation being a key driver of sustained price increases due to strong consumer demand in recent years [1] - Goods inflation has shown signs of recovery, reflecting the transmission of tariffs to consumer prices, which will help in understanding the potential drivers of inflationary pressures [1] Group 2 - The interest rate market currently estimates a 90% probability of the Federal Reserve cutting rates again in November and a 75% probability in December [1] - There is an asymmetric risk facing the market; if inflation data exceeds expectations, particularly if the core PCE year-on-year rises above 3%, it may lead investors to question the Federal Reserve's ability to implement significant rate cuts as currently priced in by the market [1]

Core Viewpoint - The report from CITIC Securities indicates that the U.S. inflation in July was largely in line with expectations, with tariffs continuing to moderately push prices up, although at a slower pace compared to the previous month [1] Group 1: Inflation and Tariffs - Tariffs are expected to have a prolonged but milder impact on prices due to a slower transfer of costs from businesses to consumers [1] - The rebound in service inflation does not show significant signs of a slowdown in service consumption demand [1] Group 2: Economic Outlook - CITIC Securities forecasts that the Federal Reserve will implement three consecutive rate cuts within the year, each by 25 basis points [1] - The increase in rental vacancy rates and a slowdown in labor demand suggest a more stable outlook for service inflation [1]

Core Viewpoint - The report from CITIC Securities indicates that U.S. inflation in July was largely in line with expectations, with tariffs continuing to moderately push up prices, although at a slightly slower pace compared to the previous month [1] Group 1: Inflation and Tariffs - Tariffs are expected to have a more gradual and prolonged impact on prices, as the ability of companies to pass on tariff costs to consumers remains intact [1] - The rebound in service inflation does not show significant signs of a slowdown in service consumption demand [1] Group 2: Economic Outlook - The increase in rental vacancy rates and a slowdown in labor demand suggest a more stable outlook for service inflation [1] - The expectation is for the Federal Reserve to implement three rate cuts within the year, each by 25 basis points [1]

Core Viewpoint - The process of inflation returning to the 2% target is already more than halfway complete [1] Group 1: Inflation Insights - It is not possible to isolate the impact of tariffs on inflation issues [1] - Service inflation has significantly slowed down, while goods inflation is on the rise [1] - The current observed tariff inflation is just the beginning [1]

Core Viewpoint - The article discusses the recent trends in the U.S. Consumer Price Index (CPI), highlighting that the core CPI increased by only 0.1% month-on-month in May, with a year-on-year rate of 2.8%, indicating a controlled inflation environment despite tariff impacts [1][5]. Group 1: CPI and Inflation Trends - The total CPI rose by 0.1% month-on-month and rebounded to 2.4% year-on-year, both figures falling short of market expectations [1]. - Core goods saw a month-on-month growth drop from 0.1% to zero, with significant declines in new and used car prices, indicating that tariffs have not yet been fully passed on to consumers [2]. - Certain categories, such as household appliances (+4.3%) and toys (+2.2%), experienced notable price increases, but these were insufficient to elevate overall inflation [2]. Group 2: Consumer Behavior and Business Strategy - Businesses have not significantly raised prices despite supply chain disruptions, as they are managing inventory levels and awaiting potential tariff reductions [2]. - Retailers are selling off pre-tariff inventory at lower prices, absorbing some inflationary pressures by compressing profit margins [2]. Group 3: Service Inflation and Energy Prices - The supercore service inflation, excluding rent, saw a month-on-month increase of only 0.1%, with declines in airfares and hotel prices suggesting reduced consumer spending on leisure activities [3]. - Gasoline prices fell by 2.6% in May, contributing to a decrease in overall inflationary pressures, although recent oil price rebounds may introduce future uncertainties [3]. Group 4: Future Inflation Expectations - The expectation is for a potential price increase in the coming months as businesses begin to pass on costs, particularly among large retailers like Walmart [4]. - Unlike the broad inflation seen in 2021-2022, the anticipated price increases are characterized as structural and one-time events rather than a result of an overheated economy [4]. Group 5: Federal Reserve Outlook - The Federal Reserve views the moderate inflation data positively but is unlikely to make significant policy changes based on a single month's data, preferring to analyze additional data sets before deciding on interest rate adjustments [5]. - The upcoming June FOMC meeting may see a slight upward revision in inflation forecasts, with a more optimistic growth outlook compared to March, potentially leading to a hawkish stance from Fed Chair Powell [5].

Core Insights - The April CPI data released by the U.S. Labor Department shows a month-on-month increase of 0.2%, lower than the expected 0.3%, indicating a decline compared to February [1] - Year-on-year CPI growth is at 2.3%, the lowest level since February 2021, and core CPI growth is at 2.8%, matching expectations and previous values [1] - The overall inflation data is considered mild, but market expectations suggest inflation may rise due to U.S. trade policies [1] Inflation Components - Core goods prices increased by 0.1% month-on-month, with new car prices unchanged and used car prices down by 0.5% [2] - Furniture and bedding prices rose from 0.6% to 1.5%, while appliance, toy, and sports equipment prices saw increases, reflecting the impact of tariffs on U.S. inflation [2] - Service inflation continues to decline, with housing inflation up by 0.3%, indicating persistent but stable housing inflation [2] Service Inflation Trends - Core service inflation excluding housing is at 3.01%, the lowest since December 2021, with healthcare and transportation services showing slight increases [3] - The labor market cooling and slowing wage growth are expected to contribute to a gradual decline in service inflation [3] - The stability of supply chains has reduced the risk of disruptions, allowing businesses to adjust and mitigate price increases [3] Consumer Behavior and Price Trends - Companies are reducing travel expenses, and consumers are cutting back on leisure spending, leading to a decrease in prices for flights and hotels [4] - OPEC+ has announced an increase in oil production, contributing to a continued decline in oil prices, which may offset inflationary pressures from tariffs [4] - The combined effects of reduced travel spending, falling oil prices, and slowing wage growth could counterbalance the inflation impact from tariffs [4]

Core Insights - Fitch Ratings' Chief Economist Brian Coulton suggests that core inflation is currently in an optimal range but this status may not be sustainable [1] - Core commodity prices have not fully reflected the tariff impacts since February, while service inflation continues to show a moderate decline [1] - The annualized three-month growth rate of core inflation has dropped below 3% [1] - Service inflation remains stubborn, and automobile prices have started to rise again [1] - As inventories of imported goods, which were acquired before tariff increases, are gradually depleted, core commodity inflation is likely to rise in the coming months [1]