Core Insights - Goldman Sachs believes that the transmission effect of tariffs on commodity prices has largely been released, predicting that by the end of 2026, the contribution of tariffs to core PCE inflation will only be 0.1 percentage points [1] - With the slowdown in housing inflation and a cooling labor market, core PCE inflation is expected to decline to 2.2% by the end of 2026, and return to the Federal Reserve's 2% target by 2027, creating space for policy shifts [1]

Core Insights - Goldman Sachs reports a potential turning point in U.S. core goods inflation, with tariff cost transmission effects diminishing, leading to an overall downward trend in inflation expected to continue towards target levels by 2026 [1][8] - The report estimates that the transmission of tariff costs to consumer prices has reached 62% after ten months of implementation, predicting core goods inflation to drop significantly from 1.97% in December 2025 to 0.08% in December 2026 [1][3] Current Inflation Trends - Inflation pressures are easing but remain above the Federal Reserve's 2% target, with the core PCE price index rising to 3.00% year-on-year in December 2025, down from a peak of 5.61% [2] - The core CPI decreased to 2.51% year-on-year in January, significantly lower than its historical peak of 6.62% [2] Tariff Impact on Inflation - The report emphasizes that the impact of tariffs on goods prices has largely been realized, which will be a key driver for declining inflation [3] - Tariffs currently contribute approximately 0.7 percentage points to core PCE year-on-year inflation, expected to reduce to only 0.1 percentage points by the end of 2026 [3] Service Sector Inflation - Core service inflation is declining at a slower pace, which is a major factor hindering a rapid return to overall inflation targets [4] - The core service PCE price index, excluding housing, showed a year-on-year increase of 3.3% in December, still above pre-pandemic levels [4] Housing Inflation Trends - Rental growth for new leases is slowing, with January showing only a 0.2% year-on-year increase, down from 0.5% in December [5] - This trend is expected to continue impacting official CPI rental data, leading to a gradual reduction in housing inflation contributions by 2026 [5] Labor Market Dynamics - The labor market is cooling, supporting the downward trend in inflation, with wage growth expectations declining [6] - The Goldman Sachs wage tracker indicated a year-on-year increase of 3.5% in Q4, with expectations further dropping to 3.2% in January [6] Inflation Expectations - Recent surveys indicate a marginal improvement in inflation expectations among residents and markets, reinforcing the credibility of the inflation decline [7] - One-year inflation expectations fell to 3.4% in February, while five to ten-year expectations remained stable at around 3.3% [7] Future Inflation Projections - Goldman Sachs predicts core PCE inflation to decrease from 3.0% in December 2025 to 2.2% by December 2026, with core CPI expected to drop to 2.1% [8] - The significant decline in core goods inflation and moderate decrease in housing inflation are expected to create more room for overall inflation to align with targets [8]

Group 1: Inflation Data - The core PCE price index in the US for December recorded a year-on-year increase of 3%, the highest since February 2025, exceeding market expectations of 2.9% and up from a previous value of 2.8% [1] - The overall PCE price index for December showed a year-on-year increase of 2.9%, also above the expected 2.8% [1] - The monthly core PCE price index for December rose by 0.4%, marking the highest level since February 2025, surpassing the market expectation of 0.3% [1] Group 2: Economic Growth and Consumer Spending - The inflation-adjusted GDP annual growth rate for the fourth quarter was 1.4%, down from 4.4% in the previous quarter, with the overall economic growth rate for the year at 2.2% [2] - Consumer spending, which accounts for over two-thirds of economic activity, increased by 0.4% in December, consistent with November's growth rate [1][2] - Adjusted for inflation, consumer spending growth was 0.1%, matching expectations and indicating a slow growth trend entering the first quarter [1] Group 3: Federal Reserve Policy Outlook - The Federal Reserve's January meeting minutes revealed a cautious stance on further rate cuts, with some officials warning that persistent high inflation may necessitate future rate hikes [3] - The Fed is gradually leaning towards a more hawkish policy stance, although most officials did not explicitly discuss rate hike options [3] - Market expectations suggest that traders still anticipate the Fed will cut rates in June, despite the recent economic data [3]

Report Industry Investment Rating - Not provided Core View - Zinc has upward elasticity [1] Summary by Relevant Catalogs Fundamental Tracking - **Price**: The closing price of the main contract of Shanghai Zinc was 24,400 yuan/ton, up 0.21%; the closing price of the LME Zinc 3M electronic disk was 3,175 US dollars/ton, unchanged [1] - **Volume and Open Interest**: The trading volume of the main contract of Shanghai Zinc was 131,273 lots, a decrease of 14,813 lots; the trading volume of LME Zinc was 10,031 lots, a decrease of 1,448 lots. The open interest of the main contract of Shanghai Zinc was 118,558 lots, a decrease of 3,135 lots; the open interest of LME Zinc was 228,807 lots, a decrease of 649 lots [1] - **Premium and Discount**: The premium of Shanghai 0 zinc was 55 yuan/ton, unchanged; the LME CASH - 3M premium was -40.12 US dollars/ton, an increase of 3.45 US dollars/ton. The premium of Guangdong 0 zinc was 20 yuan/ton, an increase of 5 yuan/ton; the import bill of lading premium was 135 US dollars/ton, unchanged. The premium of Tianjin 0 zinc was -15 yuan/ton, unchanged; the spot import profit and loss of zinc ingots was -1,844.12 yuan/ton, an increase of 88.46 yuan/ton. ZN00 - ZN01 was -45 yuan/ton, unchanged; the import profit and loss of Shanghai Zinc continuous three was -1,779.24 yuan/ton, an increase of 30.12 yuan/ton [1] - **Inventory**: The inventory of Shanghai Zinc futures was 30,300 tons, a decrease of 747 tons; the LME zinc inventory was 111,700 tons, a decrease of 150 tons. The LME zinc cancelled warrants were 8,825 tons, a decrease of 150 tons; the LME off - warrant (T + 3) was 27,758 tons, a decrease of 4,958 tons [1] - **Related Product Prices**: The tax - included price of 1.0mm hot - dipped galvanized coil was 4,077 yuan/ton, unchanged. The price of Shanghai Zamak - 5 zinc alloy was 25,560 yuan/ton, an increase of 100 yuan/ton; the price of Shanghai Zamak - 3 zinc alloy was 24,985 yuan/ton, an increase of 100 yuan/ton. The price of zinc oxide ≥99.7% was 23,100 yuan/ton, an increase of 100 yuan/ton [1] News - The governor of the People's Bank of China, Pan Gongsheng, said that there is still room for reserve requirement ratio cuts and interest rate cuts this year, and multiple monetary policy tools such as reserve requirement ratio cuts and interest rate cuts will be used flexibly and efficiently. He also mentioned maintaining the basic stability of the RMB exchange rate, strengthening market supervision, and establishing a mechanism to provide liquidity to non - bank institutions in specific scenarios, and continuing to use two monetary policy tools to support the capital market [2] - The final value of the US Q3 real GDP quarterly - on - quarterly growth rate was slightly revised up to 4.4%, the fastest growth rate in two years, and the core PCE inflation remained at 2.9%. The market generally expects the Fed to keep interest rates unchanged at the next week's interest - rate meeting [2][3] Trend Intensity - The trend intensity of zinc is 1, indicating a relatively strong trend [3]

Group 1 - The core viewpoint of the articles indicates that the gold market is influenced by dovish monetary policy expectations from the Federal Reserve, with recent economic data supporting the likelihood of an interest rate cut [1][2] - The latest U.S. economic data shows that core PCE inflation remains stable, with a month-on-month increase of 0.2% and a year-on-year decrease from 2.9% to 2.8%, reinforcing market expectations for a rate cut [2] - The Michigan Consumer Sentiment Index for December rose to 53.3, exceeding expectations, which may impact consumer behavior and spending [2] Group 2 - Geopolitical tensions, particularly the slow progress in Russia-Ukraine peace talks, continue to support safe-haven assets like gold, as uncertainty remains high [3] - Gold prices experienced fluctuations, reaching a high of 4259 before closing at 4198, with expectations for potential rebounds if support levels hold [4] - Key resistance levels for gold are identified at 4245-4260, while support levels are noted at 4165-4175, indicating potential trading strategies for investors [4]

Core Viewpoint - The preferred inflation indicator of the Federal Reserve remained below 3% in September, indicating moderate monthly price increases, which may not hinder the Fed's consideration of interest rate cuts in the upcoming meeting [1] Group 1: Inflation Data - The September PCE price index recorded a monthly increase of 0.3%, leading to a slight rise in the annual rate from 2.7% in August to 2.8% [1] - The core PCE annual rate, excluding volatile food and energy prices, decreased from 2.9% in August to 2.8% in September [1] - Monthly price increases aligned closely with Wall Street's predictions [1] Group 2: Federal Reserve Meeting Considerations - The government shutdown delayed the release of October inflation and November employment data, forcing the Fed to rely on outdated economic indicators for decision-making [1] - Fed officials will discuss balancing high inflation with a cooling labor market in the upcoming meeting, a dynamic that poses threats to both of the Fed's primary objectives [1]

Group 1 - The core PCE inflation based on market indicators is close to 2% according to Federal Reserve Governor Milan [1]

Summary of FOMC October Meeting Recap Industry Overview - The document discusses the Federal Open Market Committee (FOMC) and its monetary policy decisions, particularly focusing on interest rates and economic indicators. Key Points and Arguments 1. **Interest Rate Adjustment**: The FOMC lowered the target range for the funds rate by 25 basis points to 3.75-4% during the October meeting [2][3][4] 2. **Balance Sheet Management**: The FOMC announced that balance sheet runoff would conclude at the start of December, with principal payments of mortgage-backed securities being reinvested solely into Treasury bills [3][4] 3. **Inflation Insights**: Chair Powell indicated that inflation, excluding tariff effects, is nearing the 2% target, with tariff impacts estimated to have raised prices by 0.5-0.6% [4][12] 4. **Labor Market Trends**: Alternative data suggests a gradual cooling in the labor market, which aligns with the analysis presented [4][10] 5. **Hawkish Tone**: Powell's press conference was more hawkish than anticipated, avoiding references to the September dot plot that suggested a third cut in December [5][8] 6. **Diverse Opinions within FOMC**: Powell acknowledged differing views among FOMC members regarding the December cut, with some advocating for a wait-and-see approach [6][7] 7. **Data Collection Challenges**: The government shutdown has hindered the release of official economic data, complicating the FOMC's decision-making process [11] 8. **Future Policy Stance**: Powell views the current monetary policy as modestly restrictive, which may necessitate another cut unless the labor market stabilizes by December [12] Additional Important Insights - **Market Reactions**: The bond market perceived Powell's statements as a hawkish surprise, indicating potential volatility in response to future policy changes [5][8] - **Labor Market Weakness**: There is a belief that genuine labor market weakness exists, which could lead to negative payroll reports and further complicate the economic outlook [10][11] - **Risk Management Cuts**: There is substantial opposition within the FOMC regarding risk management cuts, suggesting a complex internal dynamic influencing policy decisions [8][9] This summary encapsulates the critical aspects of the FOMC's October meeting, highlighting the implications for monetary policy and economic conditions.

Core Viewpoint - The Federal Reserve has initiated its first interest rate cut of the year, reducing the target range from 4.25%-4.5% to 4.00%-4.25%, marking a total reduction of 125 basis points in the current easing cycle [1][9] Summary by Sections Interest Rate Decision - The Federal Reserve's decision to cut rates was widely anticipated, with a 96% probability of a 25 basis point cut reflected in futures markets prior to the announcement [1] - The Fed's updated projections indicate an increase in the expected number of rate cuts for the year from two to three, suggesting two additional 25 basis point cuts after the current one [1][12] Employment and Economic Outlook - Concerns regarding a slowdown in the job market have overshadowed inflation worries, prompting the Fed to adjust its focus on employment risks [2][3] - The Fed's statement highlighted that job growth has slowed and the unemployment rate has slightly increased, indicating heightened risks to employment [3] Voting Dynamics - In the recent FOMC meeting, 11 out of 12 voting members supported the 25 basis point cut, with only one member, newly appointed Stephen Miran, opposing it in favor of a 50 basis point cut [5][6] - The voting outcome did not reflect a significant division within the committee compared to previous meetings [7] Asset Reduction Strategy - The Fed reiterated its commitment to reducing its holdings of U.S. Treasuries and mortgage-backed securities, maintaining a slower pace of balance sheet reduction since April [4] Economic Projections - The Fed has revised its GDP growth forecasts upward for the next three years while adjusting unemployment and inflation expectations [14][15] - The updated median projections indicate a GDP growth rate of 1.6% for 2025, with inflation expected to return to the Fed's long-term target of 2% by 2028 [15]

Economic Growth Expectations - The FOMC members project a median GDP growth of 1.6% for 2025, 1.4% for 2026, and 1.8% for both 2027 and 2028, with a long-term median growth rate of 1.8% [2] - The central tendency for 2025 GDP growth is between 1.4% and 1.7%, with a range of 1.3% to 2.0% [2] Unemployment Rate Projections - The median unemployment rate is forecasted to be 4.5% for both 2025 and 2026, 4.3% for 2027, and 4.2% for 2028, with a long-term median of 4.0% [3] - The central tendency for 2025 unemployment rate is between 4.4% and 4.5%, with a range of 4.2% to 4.6% [3] Inflation Trends - The median forecast for the PCE price index year-on-year growth is 3.0% for 2025, 2.6% for 2026, 2.1% for 2027, and 2.0% for 2028, with a long-term median of 2.0% [4] - The core PCE inflation forecast (excluding food and energy) is 3.1% for 2025, 2.6% for 2026, 2.1% for 2027, and 2.0% for 2028 [4] Interest Rate Path - The median forecast for the federal funds rate is 3.6% at the end of 2025, 3.4% for 2026, and 3.1% for both 2027 and 2028, with a long-term median of 3.0% [5] - The central tendency for the 2025 interest rate is between 3.6% and 4.1%, with a range of 2.9% to 4.4% [5] Comparison with Previous Forecasts - Compared to the June 2025 forecast, the median predictions for GDP growth, unemployment rate, PCE inflation, core PCE inflation, and federal funds rate remain unchanged, indicating stable assessments by FOMC members [6] Uncertainty and Risk Assessment - FOMC members assess that the uncertainty regarding GDP growth and inflation for 2025 is "similar to or higher than" the past 20 years [7] - Some members view the risks for GDP growth and unemployment as "roughly balanced," while inflation risks are seen as "roughly balanced" or "tilted upward" [7]