Huatai Securities: The better-than-expected rebound in non-farm payrolls in March demonstrates the resilience of the US labor market. Inflation is currently the core variable of the Fed's monetary policy.

Huatai Securities believes that the stronger-than-expected rebound in non-farm payrolls in March demonstrates the resilience of the US job market. However, under the current conflicts in the Middle East, the impact of high oil prices on inflation expectations is more critical for the Federal Reserve's monetary policy. The recent escalation of tensions in the Middle East, caused by the blockade of the Strait of Hormuz, has pushed up oil prices and inflation expectations due to the shortage of oil supply. Inflation is currently a key variable for the Federal Reserve's monetary policy. The dual targets of employment and inflation give the Federal Reserve some room for maneuver, avoiding interest rate hikes to combat inflation. However, with inflation expectations rising, even if the Federal Reserve does not raise interest rates, the yield curve of government bonds may shift upward, leading to a substantial tightening in monetary policy.