On April 11th, a research report by China International Capital Corporation (CICC) pointed out that both core and overall CPI inflation in the United States fell in March, both lower than market expectations. The slowdown in inflation indicates that US aggregate demand had already weakened before the arrival of “equivalent tariffs”, such as a significant drop in oil prices, airfare, and hotel prices. The impact of tariff shocks on core commodity prices has not been fully reflected, but this may begin to manifest in the coming months. Looking ahead, we expect a wave of price increases in the United States in the second quarter before demand ultimately suppresses inflation. We expect the Federal Reserve to continue to remain cautious and not cut interest rates in the short term. Restarting interest rate cuts may occur in the third quarter.
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