It is anticipated that by the end of the year, the U.S. CPI will rise by 2.8% year-over-year, with core CPI increasing by 3.2% year-over-year. The U.S. food inflation may face temporary pressure, while the upward risk of U.S. energy inflation is limited. The inflation rate of core goods is likely to fluctuate around zero growth, and core services may exhibit certain stickiness. It is expected that there is a high probability of a 25 basis point rate cut in November, with a 50 basis point reduction still possible within the year. In the short term, the upward risk for short-end U.S. Treasury yields is limited, while long-end U.S. Treasury yields may experience substantial fluctuations.

Affected by weather and policy changes in some countries, grain prices have risen recently, and the U.S. food CPI may face temporary sequential growth pressure in the future. In September, the U.S. food CPI increased by 0.4% month-over-month, marking the highest value in eight consecutive months. Global grain prices have risen due to concerns about unfavorable weather conditions in some food-exporting countries. Additionally, influenced by supply-related policies in some countries, the FAO meat and sugar price indices have also seen recent sequential increases. The sequential rise in grain prices may drive temporary sequential growth pressure in the U.S. food CPI.

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U.S. energy inflation continues to cool down, and due to the recent announcement of increased production by OPEC+, if there are no further escalations in the Middle East, the room for energy price increases is limited. The U.S. energy CPI has seen negative growth for several months, possibly due to sustained high levels of U.S. crude oil production and a decline in global crude oil demand expectations. Since the escalation of conflict between Iran and Israel at the beginning of October, global concerns about oil supply have intensified, leading to a significant increase in oil prices at the beginning of October. However, after the monitoring committee meeting at the beginning of October, OPEC+ stated its plan to increase production by 180,000 barrels per day starting in December. Recently, as the situation in the Middle East has become clearer, oil prices have fallen again. Considering the uncertainty of the global economic recovery and the pressure of OPEC+ production increases on crude oil prices, if geopolitical risks do not exceed expectations, the upward risk for energy prices in the future is relatively limited.

Core goods inflation may fluctuate around zero growth. The CPI for new cars has been negative for six consecutive months year-over-year, and it is expected that the current situation of ample supply and weak demand in the new car market will put downward pressure on new car prices, with the CPI for new cars likely to fluctuate around zero growth within the year. At the same time, despite tight inventory of used cars, consumers seeking lower-priced vehicles in a high-interest-rate environment may stabilize the CPI growth rate for used cars and trucks around zero. Overall, the probability of U.S. core goods inflation fluctuating around zero growth within the year is high, and even if there is upward pressure, it is expected to be relatively moderate.

Regarding core services, the recent slowdown in U.S. wage growth, considering the lag effect of wage growth pressure and the expected slowdown in the sequential growth rate of the shelter category, the risk of a significant upward movement in the year-over-year growth rate of core services is low in the short term. Recent wage growth has slowed, with average hourly earnings growth stabilizing year-over-year, and the decline in wage growth for job switchers and stayers also slowing. The slowdown in the pace of wage growth may have a lagging effect on the growth rate of core services inflation, and considering the current slowdown in the sequential growth rate of the shelter category, with housing prices still on a downward trend, and rent growth only slightly rebounding after a significant decline from 2022 to 2023, the risk of a significant upward movement in the year-over-year growth rate of core services is low in the short term.

Overall, it is expected that by the end of the year, the CPI will rise to around 2.8% year-over-year, and the core CPI year-over-year will be around 3.2%.Although it is expected that the core commodity CPI month-on-month growth rate may fluctuate around zero within the year, due to the certain inflationary pressure on food items in the United States during certain periods, the energy CPI is less likely to make a significant contribution to the year-on-year decline of the CPI. The core service items may have certain stickiness, but the risk of a significant increase in the year-on-year growth rate of core service items in the short term is relatively low. There is a risk of an increase in the year-on-year CPI, and by the end of the year, the CPI year-on-year may rise to around 2.8%. The downward space for the core CPI year-on-year within the year may be limited, and the core CPI year-on-year by the end of the year may be around 3.2%.

In the short term, the risk of an upward movement in U.S. Treasury yields is limited, and the long-end U.S. Treasury yields may experience wide fluctuations. It is essential to closely monitor the further release of important U.S. economic data.

With the U.S. employment data for September exceeding expectations and the inflation data for September falling slightly short of expectations, coupled with the continued hawkish remarks by Federal Reserve officials in October, the market's expectations for interest rate cuts have cooled, leading to a significant increase in long-end U.S. Treasury yields recently, with the 10-year U.S. Treasury yield once again surpassing 4%. The hurricane in the southeastern United States led to a sharp increase in the number of initial jobless claims in the first week of October. It is expected that the weather will affect the non-farm employment data to be released next month in October. Considering that the short-term inflation risk in the United States is relatively controllable, it is anticipated that there is a high probability of a 25 basis point rate cut in November, with a 50 basis point reduction space remaining for the year. The market's adjustment for interest rate cut expectations has been relatively sufficient. In the short term, long-end U.S. Treasury yields may fluctuate widely following the release of economic data, and the risk of further upward movement in short-end U.S. Treasury yields is limited. It is crucial to closely monitor the U.S. third-quarter GDP data to be released at the end of October. If the economy exceeds expectations in the third quarter, it may cause fluctuations in Treasury yields at that time.