Shenwan Hongyuan Group: The "de-inflation" in the United States is proceeding slowly, uncertainty mainly comes from Tariff 2.0.

Shenwan Hongyuan Group Securities released a research report stating that in December, US CPI inflation was weaker than market expectations, temporarily suppressing the previous "inflation trade." Structurally, the weakening of durable goods inflation is the main reason. The institution stated that the US may still show slow "de-inflation" in 2025, with uncertainty mainly coming from the "tariff 2.0." Looking ahead to 2025, there is still significant room for wage growth, core non-rental service inflation to fall, and the job market may transition to a "de-inflation" momentum later. Without considering the impact of Trump 2.0 policies, base effects may lead to a significant drop in US CPI year-on-year from January to April 2025, followed by a slight rebound, and finally dropping to around 2% by the end of 2025. Shenwan Hongyuan Group's main points are as follows: 1. US December CPI slightly weaker than market expectations, Fed rate cut expectations slightly increased US December CPI was slightly lower than market expectations, with both the "breadth" and "stickiness" of inflation decreasing. In December, US CPI year-on-year was 2.9% and month-on-month was 0.4%, meeting market expectations. However, core CPI year-on-year was 3.2% and month-on-month was 0.2%, slightly weaker than market expectations. After the CPI data was released, market expectations for a Fed rate cut were slightly increased, and Fed officials also appeared dovish. US bond yields significantly declined, cooling off the "re-inflation" trade, but policy uncertainty may still cause rates to fluctuate at high levels. This week, the 10-year US bond yield significantly declined, with TIPS rates falling by about 14 basis points while implied inflation expectations did not change significantly. In the short term, uncertainties surrounding multiple policies during the initial period of Trump's presidency and the economy's resilience may still lead US bond yields to fluctuate at high levels.