TF SECURITIES: Is a rate cut in December also on the way?

According to the Zhitong Finance APP, Tianfeng Securities released a research report stating that for subsequent assets, U.S. Treasury yields continue to decline. As the depreciation of the yen comes to an end, the dollar may gradually shift from volatility to a downward trend. Benefiting from this, major commodity categories are expected to rise, and the recently plummeted gold and silver are also expected to rebound. The overseas interest rate cut cycle has begun, which is favorable for capital inflows into emerging markets.

U.S. September CPI Inflation Falls Below Expectations

September CPI year-on-year is 3.0%, expected 3.1%, previous value 2.9%; CPI month-on-month is 0.3%, expected 0.4%, previous value 0.4%. Core CPI year-on-year is 3.0%, expected 3.1%, previous value 3.1%; core CPI month-on-month is 0.2%, expected 0.3%, previous value 0.3%.

By category:

1) Food inflation cools; energy commodity prices rise significantly.

Food items month-on-month are 0.2% (previous value 0.5%), year-on-year 3.1% (previous value 3.2%), both cooling; energy commodities surged 3.8% month-on-month (previous value 1.7%), while energy services fell to -0.7% month-on-month (previous value -0.2%); overall energy items rose 1.5% month-on-month, significantly up 0.8 percentage points from the previous value.

2) Core goods: Inflation slows down driven by new and used cars.

Core goods month-on-month are 0.2% (previous value 0.3%), year-on-year 1.5%, unchanged from the previous value. The cooling of core goods inflation is mainly due to the significant cooling of used cars and auto parts inflation, which fell from 0.5% to 0% month-on-month and from 2.6% to 2.3% year-on-year; additionally, information technology goods cooled, falling from -0.3% to -0.8% month-on-month.

Furniture and home goods, clothing, leisure goods, and healthcare goods have seen an increase in their contribution to inflation, possibly reflecting the continued impact of tariffs on prices.

3) Core services: Inflation slows down driven by housing and transportation services.

Core services month-on-month are 0.2% (previous value 0.3%), year-on-year 3.5% (previous value 3.6%). The month-on-month growth rate of housing, which has the largest weight, fell from 0.4% to 0.2%; additionally, transportation services, which performed strongly during the summer, saw inflation cool in September, falling from 1.0% to 0.3% month-on-month; while the month-on-month growth rates of medical services and leisure services increased.

This data again dispels concerns that tariffs will lead to "stagflation."

According to USITC data calculations, the latest (as of July) average effective tariff rate imposed by the U.S. on global automobiles is 19.3%, compared to 2.2% before Trump took office. Despite the significant increase in tariffs, the month-on-month growth rate of automobile CPI has cooled, which may reflect that the tariffs are mainly borne by exporters or importers.

The overall CPI falling below expectations increases the likelihood of two more rate cuts this year.

The Federal Reserve FOMC meeting next week is almost certain to result in a rate cut, and the probability of another rate cut in December has risen to 96% (up from 91% a day earlier); after the data was released, U.S. stock index futures climbed, while U.S. Treasury yields and the dollar fell.

After the release of this data, the U.S. White House stated that inflation data may not be released next month (due to government shutdown). Thus, this CPI data may also be crucial for the FOMC meeting on December 10 Risk Warning: The U.S. economic fundamentals exceed expectations, the Federal Reserve's monetary policy exceeds expectations, and global tariff policies exceed expectations