Inflation Data - In September, the US CPI rose by 0.1 percentage points to 3.0%, marking the highest level since the beginning of the year[2] - Core CPI fell slightly by 0.1 percentage points to 3.0%, which was below market expectations[2][3] - The month-on-month increase in core CPI was 0.23%, a decrease of 0.12 percentage points from August[3] Economic Factors - The increase in durable goods prices was 0.32% month-on-month, indicating ongoing effects from tariffs imposed earlier this year[3] - Labor market cooling and a weak real estate market contributed to the decline in inflation, with core non-durable goods and core services rising by 0.08% and 0.24%, respectively[3][4] - Despite a 25 basis point rate cut by the Federal Reserve in September, long-term interest rates remained high, limiting the rebound in core CPI[3][4] Future Outlook - The potential for a rebound in core CPI exists in the first half of next year due to the recovery of key factors and base effects[4][16] - The upcoming fiscal expansion may boost manufacturing investment and create jobs, impacting inflation dynamics positively[4][16] - The US dollar index may gain momentum from economic cycles and monetary easing in developed economies[4][16]

Core Viewpoint - The article discusses the recent Consumer Price Index (CPI) data released by the U.S. Bureau of Labor Statistics, indicating a mixed inflation outlook and potential implications for Federal Reserve interest rate decisions [3][5]. Inflation Data Summary - In July, the CPI increased by 0.2% month-on-month, matching expectations and slowing from June's 0.3% rise; year-on-year growth remained at 2.7% [3]. - The core CPI, excluding food and energy, rose by 0.3% month-on-month, the largest increase since January, and year-on-year growth reached 3.1%, up from June's 2.9% [3]. Market Reactions - Following the CPI release, market analysts expressed relief, suggesting that the data reduces concerns about inflation, thereby increasing the likelihood of a rate cut by the Federal Reserve in September [4][5]. - Current market expectations indicate over an 80% probability of a 25 basis point rate cut on September 17 [5]. Price Drivers - Housing and service prices led the increase, with housing costs rising 0.2% month-on-month; dining out and medical services also saw increases of 0.3% each [6][7]. - Energy prices, however, fell by 1.1%, with gasoline prices dropping by 2.2%, acting as a counterbalance to overall inflation [7]. Year-on-Year Price Changes - Year-on-year, housing prices increased by 3.5%, and medical services rose by 4.3%, while used car prices decreased by 4.8%, and overall energy prices fell by 6.6% [8]. Data Collection Concerns - The article highlights concerns regarding the reliability of CPI data due to a reduction in sample collection by the Bureau of Labor Statistics, which may lead to increased volatility in monthly data [11][12]. - The reduction in data collection is attributed to budget and staffing cuts, raising questions about the stability and representativeness of inflation readings [12]. Tariff Impact - There are indications that tariffs imposed by the Trump administration are beginning to affect consumer prices, with a survey showing that 32% of small businesses plan to raise prices, the highest level since March of the previous year [12]. - Economists suggest that price increases in imported goods such as tools, appliances, and furniture signal that tariffs are starting to exert upward pressure on prices [13].

Economic Indicators - In May, the U.S. CPI rose slightly by 0.1 percentage points year-on-year to 2.4%, while the core CPI remained flat at 2.8% for the third consecutive month[2] - The month-on-month increases for May were 0.08% for CPI and 0.13% for core CPI, indicating a slight decline from April's figures[2] Inflation Dynamics - The core CPI's stagnation is attributed to the decline in durable goods prices and a cooling rental market, influenced by lower energy prices and temporary tariff impacts[3] - Core durable goods prices fell by 0.11% month-on-month in May, marking the lowest level this year, primarily due to OPEC+ production increases affecting international oil prices[3] Future Projections - Despite the current low inflation rates, the potential for core inflation to rebound remains due to sustained high wages and the anticipated passage of the "Big and Beautiful" plan, which could boost consumer demand[3] - The rental market saw a month-on-month increase of 0.26% in May, reflecting a lagging effect from previous interest rate peaks, suggesting potential upward pressure on housing prices and inflation in the future[3] Monetary Policy Outlook - The market's expectations for a Federal Reserve rate cut have increased, but the necessity for aggressive cuts is diminished due to low unemployment and high wage growth[3] - If the fiscal expansion plan is fully implemented, it may lead to a gradual increase in the dollar index and potential depreciation pressures on the RMB, limiting the People's Bank of China's monetary easing options[3] Risks - There is a risk that the Federal Reserve may cut rates faster than anticipated, which could impact market dynamics[4]

Core Insights - If the core inflation in the U.S. remains sticky in April, the dollar may receive some support [1] - This situation would bolster the narrative that the Federal Reserve is not in a hurry to cut interest rates [1] - The market has reduced bets on rate cuts, pushing expectations for the next cut to September [1] Inflation Data - Economists expect the core inflation rate in April to rise by 0.3% month-on-month, which is higher than the 0.1% increase in March [1]