CICC: Maintain the baseline judgment that the Federal Reserve will not cut or raise interest rates within the year.

Zhongjin pointed out that the seasonally adjusted month-on-month CPI in the United States increased by 0.5% in May, with a year-on-year increase of 4.2%, the highest level since 2023; the core CPI rose by 0.2% month-on-month and 2.9% year-on-year. This round of inflation was mainly driven by the energy sub-index, with gasoline and fuel leading the way, and the transmission effects of items such as airplane tickets and courier services continuing to show, but not widely spreading. Core inflation as a whole remained moderate, demand in oil-sensitive areas such as automobiles was squeezed, and rent increases narrowed significantly. Zhongjin believes that the current inflation is still mainly driven by structural factors such as energy shocks, and cyclical inflation is not yet significant, but caution is needed against the risk of a total demand rebound from AI capital spending expansion and improved employment. In terms of monetary policy, Zhongjin maintains the baseline judgment that the Federal Reserve will not lower interest rates or raise them within the year. It is expected that the Fed's attitude will remain hawkish, with Powell's primary task upon assuming office being to rebuild policy credibility, most likely demonstrating determination through strengthening expectations of balance sheet reduction rather than indicating rate hikes. It is not ruled out that a scenario of "balance sheet reduction first, rate cuts delayed" may occur, posing continued pressure on asset portfolios that are incongruent with Powell's principles, rely on liquidity drive, and benefit from US dollar overissuance.