Guolian Minsheng Securities: U.S. CPI exceeded expectations in November, reevaluating the interest rate cut path?

Guolian Minsheng Securities released a research report stating that the US inflation data for November gave the market a "surprise". Structurally, energy and food inflation continue to be the main drivers supporting overall CPI, while core inflation shows a clear weakening trend. For the Federal Reserve, although the November CPI is unlikely to change the decision to temporarily postpone interest rate cuts in January next year, it will undoubtedly increase the dovish voices within the Fed. If the December data continues the current trend of slow growth, it may prompt the Fed to re-examine the interest rate cut path for next year, but everything will depend on the release of the "clean" data in December before any conclusions can be drawn. The main viewpoints of Guolian Minsheng Securities are as follows: As the last major data for the year in the US, the November inflation data undoubtedly came as a "surprise" to the market. CPI and core CPI both fell significantly year-on-year to 2.7% and 2.6%, not only well below the market's average expectation of 3%, but core inflation even dropped to the lowest level since early 2021. Faced with this unexpected "good news", asset prices were optimistic, the US dollar briefly fell, stocks and bonds rose, the Nasdaq rose by over 1%, and there was some profit-taking in precious metals after their rise. However, upon closer examination, the November inflation data shows clear statistical "noise". On one hand, the government shutdown severely affected the Department of Labor's data collection, resulting in missing month-on-month inflation data for October and November, limiting the available information for market interpretation. On the other hand, given that the US government only resumed normal operations mid-November, and the statistical interval for the November price survey only covered the latter part of the month, coinciding with holiday promotions such as Thanksgiving, seasonal price fluctuations may have led to a certain degree of distortion in the statistical results. For the market, although the data quality is questionable, this incomplete report at least sheds some light and eases short-term concerns about inflationary pressures. With the Fed's interest rate cut space gradually narrowing, only economic data showing significant improvement or deterioration beyond expectations may have a clear impact on the market. Good news (Golden-haired girl state) and bad news (Fed PUT exercise) are considered good news, while news that is not good or bad enough is not counted. What the November nonfarm payroll data did not fully accomplish, this inflation report successfully took the key "first step". For the Federal Reserve, although the November CPI is unlikely to change the decision to temporarily postpone interest rate cuts in January next year, it will undoubtedly increase dovish voices within the Fed. If the December data continues the current slow growth trend, it may prompt the Fed to reconsider the interest rate cut path for next year. The combination of "economic slowdown + low inflation" will help the Fed make more interest rate cut decisions than the median of the December dot plot (only one interest rate cut in 2026), but everything will depend on the release of the "clean" data in December before any conclusions can be drawn. Structurally, energy and food inflation continue to be the main drivers supporting overall CPI, while core inflation shows a clear weakening trend: Food and energy inflation maintain high growth rates year-on-year, consistent with high-frequency data. In November, the US gasoline retail price saw further year-on-year growth, while global food prices monitored by the International Grain and Oil Organization also rose compared to September, providing upward pressure on overall inflation. However, core inflation has significantly weakened, with core services leading the decline: On one hand, under the influence of tariffs, goods inflation is more resilient. In November, core goods inflation decreased only slightly to 1.4% year-on-year, mainly affected by the decline in automobile inflation, possibly related to the expiration of the prior federal tax incentives for electric vehicles, leading to a temporary decline in car sales. Import-dependent categories such as clothing, furniture, and leisure goods maintained relatively high year-on-year price growth, showing that the tariff transmission effects on the cost side of related categories have not yet dissipated. On the other hand, core services inflation was the main factor leading to the overall decline in core inflation in this period. Specifically, housing inflation year-on-year fell significantly from 3.6% to 3.0%, as the inhibitory effects of a high-interest rate environment on housing market demand continued to show, largely offsetting the upward pressure from the goods side. Meanwhile, super core inflation continued its downward trend, with year-on-year growth falling from 3.2% to 2.7%, with transportation services (especially airfare prices) and leisure services showing the most prominent price declines in specific subcategories. Risk Warning: Significant changes in US trade policies; unexpected spread of tariffs leading to a greater-than-expected global economic slowdown and market adjustment.