The U.S. CPI Increased by 4.2%…

The U.S. CPI increased by 4.2% year-on-year in April, which has greatly exceeded market expectations and has hit a new high since September 2008. As soon as the data was released, it increased market concerns about price issues. In this context, the U.S. dollar index and U.S. bond interest rates fluctuated sharply.

According to Wall Street estimates, the US CPI rose 0.8% month-on-month and 4.8% year-on-year in May. In May, the core CPI rose by 0.6% month-on-month and 3.6% year-on-year. The growth rate will hit a new high since February 1993.

Among them, the continued increase in energy transportation and second-hand car prices will be the main driving force for the upward trend of CPI. In addition, the bottoming out of consumer demand and prices for rent, clothing, entertainment, etc. will also become important factors in pushing up the CPI and core CPI upward. Increment.

Moreover, consumer prices at these levels, especially rents, have a relatively high weight and there is a certain degree of rigidity in the upward direction, which will make the core CPI easier to go up and down. From the trend point of view, it can also be found that the core CPI of the pressure peak in the next four quarters will be higher than the CPI.

Fully anticipated market & tangled Fed

Having learned the lesson that inflation exceeded expectations in April, the market has already made a fuller expectation of inflation in May, and the consensus is that it has reached an increase of 4.7%-5%. Unless the actual published data soars above 5%, the impact of published inflation data on risky assets will not be overly obvious.

From the point of view of the ten-year debt-free interest rate, the response of inflation expectations began to fall unexpectedly from mid-May, or it may show that the market is numb to the Fed’s attitude of allowing inflation to rise.

When will the Fed let inflation go? On the one hand, the weaker-than-expected employment data has not yet given the Fed more sufficient evidence to take action. The second is to prove that this round of inflation is sustainable and requires more months of data to support it.

is only prosperous and declining, although it will arrive late.

O/N RRP hits high again: According to data released by the New York Federal Reserve yesterday, the Fed’s overnight fixed interest rate reverse repo transactions of US$502.9 billion continued to exceed the level of the peak of the new crown epidemic in March last year. (Narrowly speaking, there is excess liquidity.)

The Federal Reserve withdraws from the SMCCF: On June 3, the New York Federal Reserve stated that it plans to gradually sell a portfolio of corporate bonds purchased by an emergency loan arrangement initiated last year in response to the new crown epidemic. The sale plan starts from the ETF, and the sale of corporate bonds will begin later in the summer, with the goal of completing this work before the end of the year. (Not a signal of monetary policy, but a signal of monetary policy.)

How to weigh the balance between weak employment and strong inflation, the June-August interest rate meeting will always give an answer.