Zhongjin: US inflation has not receded, and the risk of economic "stagflation" still deserves attention.

The research report from China International Capital Corporation Limited (CICC) stated that the seasonally adjusted month-on-month CPI in the United States increased by 0.4% in August, reaching 2.9% year-on-year. The core CPI increased by 0.3% month-on-month and 3.1% year-on-year, in line with market expectations. Looking at individual items, driven by automobiles, core goods prices rose by 1.5% year-on-year, the highest increase since May 2023, indicating a shift from deflation to inflation in the core goods sector from 2023 to 2024. The impact of tariffs on prices other than automobiles is not significant, indicating that businesses may face resistance in passing on tariff costs. The slowdown in service inflation has also come to a halt, with significant rebounds in soft ticket and hotel prices in the first half of the year especially worth watching. Overall, this inflation data is not mild, but due to continued weakening employment data, the Federal Reserve will have to cut interest rates first. However, in the context of supply contraction, the stimulus effect of interest rate cuts often manifests more in price increases rather than output expansion, which means that the space for interest rate cuts may be limited, and the risk of economic "stagflation" still deserves attention.