On August 10, local time, according to data released by the U.S. Department of Labor, the U.S. CPI rebounded slightly in July, with a year-on-year growth rate of 3.2%, 0 more than last month.2 percentage points, but still below market expectations。

In addition, the year-on-year growth rate of core CPI, excluding energy and food factors that are more affected by the season, was 4.8% down to 4.7%, a new low since October 2021。This is a positive sign, as the trend in core CPI has been highly watched by the Fed in the recent past, and the decline in this data suggests that the bank's inflation governance process has made positive progress.。

China Merchants Macro: Core CPI to fall to near 2% by the end of the year at the earliest

Specifically, in terms of non-core inflation, the year-on-year decline in the U.S. CPI energy item narrowed to -12 in July..5%, compared to the previous value of -16.7%; growth of 0.1%, while the former value is 0.6%。Among them, fuel rose 3% in July, natural gas services rose 2%, gasoline rose 0.2%, both rising, representing energy inflation resilience remains。

Worryingly, entering August, global oil prices continue to rise, and it is difficult to guarantee that energy inflation will not continue to rise in the next CPI data.。According to the American Automobile Association (AAA), the average price per gallon of gasoline is currently 3.$89, the highest level since October 2022。Oil prices have been rising, mainly due to production cuts by major oil producers such as Saudi Arabia and Russia.。

On the other hand, due to the high energy prices in the first half of last year, the resulting base effect makes energy prices in the first half of this year fell more year-on-year, but the base effect will weaken in the second half of this year, coupled with the recovery of energy prices, which means that there is a risk that energy inflation will rebound upward month-on-month.。

In the food sector, the sub-item rose 4% year-on-year in July..9%, as the food index of four out of six major food stores rose in July, helping inflation to the upside。

In terms of core inflation, the most heavily weighted housing services grew 7% year-on-year in July..7%, contributing 90% to CPI growth in July。Data show that the U.S. Zillow rent index year-on-year growth rate from February this year to date significantly downward, due to the forward-looking data on housing services have a lagging impact, housing services are expected to be in the third and fourth quarters of this year, driving the U.S. core CPI cooling。According to the latest research from the Dallas Fed, CPI rents in the U.S. will rise from the current 7.7% high, falling back to 5 in the first quarter of next year.The 7% level。

According to China Merchants macro forecast, due to the slowdown in housing inflation and energy inflation upward, the U.S. core CPI and overall CPI may diverge in the follow-up trend, the U.S. core CPI or will quickly decline, in the end of this year to early next year or fall to near 2%。

The data was backed by David Kelly, chief global strategist at Morgan Asset Management.。According to him, the U.S. consumer price index data released on August 10 gave the market optimistic confidence that inflation in the U.S. will fall back to 2 percent on its own by the end of next year.。

He also called on investors to buy U.S. bonds, as the overall pricing of the product is better than in the past few years, and as interest rates fall, it will bring a one-time capital gain.。

After the data is released, the probability of the Fed's interest rate unchanged in September is 90%.

After the data was released, the market welcomed the better-than-expected report and explored the possibility of another Fed pause in rate hikes。

There is a view that the Fed should skip raising interest rates in September, using the lag and cumulative effects of monetary policy to slow the economy.。

I think the Fed's intention is to skip rate hikes in September, and this CPI data should still encourage them, but that's certainly not the final word, said Stephen Stanley (Stephen Stanley), chief U.S. economist at Santander U.S. Capital Markets.。

Analyst Joe Saluzzi also said that in a sense, the CPI data looks good, not worse than expected, and is actually a little better than expected.。This is the number the US would expect to see, the CPI is on a good track to decline, and in general, if he is the Fed, then this is not a number that needs to raise interest rates again。The market will see this and say it's time to start pausing for rate hikes。

There is a "new Fed News Agency" said the Wall Street Journal reporter Timilos (Nick Timiraos) also wrote that, according to the latest inflation data show that price pressures continued to cool last month, which may be the Fed in September's meeting to choose to suspend interest rate hikes to open the door。

But there are also different voices that the downward trend in inflation data is not qualitative, the Fed is still likely to continue to raise interest rates in September。

Canadian Imperial Bank of Commerce analyst Ali Jaffery stressed that while the two well-performing inflation readings are not a trend, they will be welcomed by Fed Chairman Powell.。This puts the Fed's decision to raise rates in September at risk, although a rate hike is still possible if upcoming data shows a stronger economy。

In addition, Allianz Group Chief Economic Adviser Erian (Mohamed El-Eria) also posted on social media, people are worried about the emergence of the United States "inflation smile," that is, inflation is currently falling, but inflation will rebound in the fourth quarter of this year。Adding to the concerns, he added, was the fact that core inflation remained high.。

Currently, according to CME's (CME) FedWatch tool, the probability that the Fed will keep interest rates unchanged at its September meeting is up from about 86 before the data was released..5% to 90.5%, the market is expecting the Fed's next move。