CMSC: US CPI Exceeds Expectations, December Rate Hike Almost Certain

CMSC released a research report stating that on November 10, US CPI data was released. October 2026 CPI rose 0.4% month-on-month on a seasonally adjusted basis, below the previous value of 0.6% but above the market expectation of 0.3%; core CPI, excluding food and energy, rose 0.3% month-on-month, maintaining this pace for the third consecutive month and above the market expectation of 0.2%. Although headline inflation moderated on a month-on-month basis as the month-on-month growth rate of energy prices declined, core inflation remains sticky. Current US inflationary pressure has not yet been effectively alleviated, and a December rate hike is almost certain. Before the December FOMC meeting, there will still be one nonfarm payrolls release and one inflation reading for reference. CMSC's main views are as follows: US October CPI exceeded expectations, and a December rate hike is almost certain. On November 10, US CPI data was released. October 2026 CPI rose 0.4% month-on-month on a seasonally adjusted basis, below the previous value of 0.6% but above the market expectation of 0.3%; core CPI, excluding food and energy, rose 0.3% month-on-month, maintaining this pace for the third consecutive month and above the market expectation of 0.2%. Recently, although headline inflation has moderated on a month-on-month basis as oil prices fell amid the US-Iran situation, core inflation remains sticky. Current US inflationary pressure has not yet been effectively alleviated, and a December rate hike is almost certain, with the risk of an accelerated rate hike in December warranting vigilance. However, considering that the earlier monetary tightening has begun to show results, and that if the US-Iran conflict can continue to ease or even end it would accelerate the disinflation trend, combined with current weak market sentiment and capital market stability, the probability of an accelerated rate hike is low. Monetary policy and interest rates: Last week (11/2-11/6), the central bank recorded a net liquidity withdrawal of RMB1.523 trillion in open market operations, and RMB226 billion of reverse repos will mature in the coming week. Money market rates rose, short- and long-term government bond yields fell, the scale of negotiable certificate of deposit (NCD) issuance declined, and issuance rates were mixed. As of November 6, R007 fell 4.3bp, DR007 rose 0.0bp, the 1-year government bond yield fell 0.3bp, the 10-year government bond yield fell 6.3bp, the scale of NCD issuance decreased by RMB436.09 billion, 1M/6M NCD rates rose, and 3M NCD rates fell. Fund supply and demand: Trackable funds in the secondary market saw net inflows. Margin financing balances declined, with net margin financing selling of RMB60.34 billion; ETFs saw net inflows of RMB195.48 billion; the share of newly established equity-oriented public funds decreased. Major shareholders shifted from net increases to net decreases in holdings, and the scale of announced reduction plans declined. Market preferences: By industry preference, electronics, power equipment, and banks received relatively high net inflows from various types of funds. Broad-based ETFs all saw net subscriptions, with CSI 300 ETFs seeing the most subscriptions; sector ETFs were mainly net redemptions, with broker ETFs seeing relatively large redemptions and new energy & smart vehicle ETFs seeing relatively large subscriptions. The highest net subscription was Huatai-PineBridge CSI 300 ETF; the highest net redemption was Guotai CSI Semiconductor Materials and Equipment Theme ETF. Risk warning: Economic data and policies falling short of expectations, overseas policy tightening exceeding expectations.