June 12 Macroeconomic Narrative Thread Outlook! Reading Recommendation: ★★★★
Tonight's macroeconomic narrative (determines the direction of this week's market):
20:30 US May CPI data (broad inflation data)
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02:00 The Federal Reserve announces its interest rate decision and a summary of its economic forecasts (the dot plot for this quarter is updated during the same period. Highlights!)
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02:30 Fed Chairman Powell holds a monetary policy press conference (expressing his views and answering questions from reporters)
Important index: CPI ★★★★
Interest rate decision
Dot chart for this quarter ★★★★★
Powell's Speech
20:30 US May CPI data (broad inflation data):
The broad inflation data of the United States is used to measure a basket of consumer goods and services through statistics, so as to obtain the broad inflation data of the United States. However, because it involves a basket of attributes, statistics are relatively limited, so PCE becomes a more important measurement data, and CPI is the apparent inflation data. To put it bluntly, even if the CPI data is reduced, the Federal Reserve can still use the PCE data to influence the final inflation "answer". CPI is low, but PCE does not fall, there is still inflation pressure. Does this sentence sound familiar?
Inflation data tonight:
CPI annual rate: previous value 3.4%, expected value 3.4%. The possibility of a decrease in expected inflation is not high, and the possibility of an increase is even lower.
CPI monthly rate: 0.3% expected 0.1%,
Annual rate: compared with the same month last year; monthly rate: compared with the data of the previous month, two different ways of comparison.
JPMorgan Chase has previously predicted that the monthly inflation rate is 40% likely to remain the same as the previous value and has a chance of rising. According to the employment data released last week, the monthly CPI rate is likely to continue to remain strong. However, the CPI must continue to remain strong, which will basically not affect the annual CPI. The current data shows that US energy prices have eased, but the service industry is still strong. At the same time, the wages and slight increases in the May employment data will bring pressure to short-term inflation.
Seasonally adjusted core CPI: Seasonally adjusted (calculation method that excludes seasonal factors) core CPI (excluding energy and food with large short-term price fluctuations). The core CPI will more intuitively reflect US inflation while eliminating the impact of energy, food and seasons.
Core CPI annual rate: previous value 3.6%, expected 3.5%, monthly rate: previous value 0.3%, expected 0.3%
The data shows that after excluding energy and food, inflation has fallen. At present, most of the threats to inflation are still energy and food (services).
The core CPI serves as a reference for the authenticity of inflation, but the market still focuses on the trend of broad CPI data.
Influence:
The annual CPI, the announced value is lower than the expected and previous value, inflation is lower, which is positive, and the risk market is rising.
The published value is higher than expected and the previous value, inflation is rising, which is bearish, and the risk market is falling.
The announced value is equal to the expectation and the advance value. Inflation is stubborn. Wait and turn your attention to the monthly CPI rate.
The monthly CPI value was higher than expected but lower than the previous value. Short-term inflation slowed down, which was positive and risk markets rose.
The announced value is approximately expected and equal to the previous value. Inflation is stubborn and there is a wait and see trend of decline. The risk market is trading sideways or falling slightly.
The announced value is equal to expectations and lower than the previous value. Inflation is effectively reduced in the short term, which is positive and risk markets are rising.
If the CPI is positive, the market will directly trigger an increase, and the increase may be short-lived, because there are still many uncertainties in the dot plot and Powell's speech tonight. However, if the CPI is negative, or the data remains unchanged, inflation remains stubborn and will not fall in the short term. It is possible to prick the needle, after all, we still have to look at the dot plot and Powell's speech.
02:00 The Federal Reserve announces its interest rate decision and a summary of its economic forecasts (the dot plot for this quarter is updated during the same period. Highlights!)
The interest rate decision is basically to continue to maintain 5.25%-5.5%, which is not controversial at present.
The dot plot is an anonymous expression of the Federal Reserve officials' views on interest rates. The dot plot is updated quarterly and released after four Federal Reserve meetings.
The dot plot game theme: whether to cut interest rates this year or not, whether to cut interest rates or how many times to cut interest rates, are all game points.
One interest rate cut is in line with previous market expectations. Influenced by last week's employment data, the market was very pessimistic about interest rate cuts and believed that there would only be one or no interest rate cuts.
Two or more interest rate cuts will trigger greater speculation. If there are more than two interest rate cuts, the first interest rate cut will be pushed to September this year by market expectations, followed by November and December at the end of the year.
If interest rates are not lowered, then destruction will happen. There is no need to analyze. The risk market will collapse, but the probability of this is extremely small.
As for the overall policy of interest rate cuts, we will not make too many guesses. At present, everyone’s focus is on the action of interest rate cuts. We will not care about the specific actions of the interest rate cuts for the time being. As long as they dare to boldly announce the expectation of interest rate cuts, it will be a big positive.
02:30 Fed Chairman Powell holds a monetary policy press conference (expressing his views and answering questions from reporters)
It is most likely that Powell will continue to be good at dancing with his sleeves, after all, he is a master of expectation management. If the press conference releases too dovish signals, he will probably be scolded by his boss, but if he is too hawkish and causes excessive pessimism in the risk market, he will probably also be scolded by capital, so it is more likely that he will continue to be good at dancing with his sleeves.
The key point is that the unemployment rate was pushed to 4% last week. How will Powell respond to this matter? Will he add fuel to the fire and talk about interest rate cuts, or will he regard it as a single data point and continue to wait and see?
Secondly, regarding the interpretation of CPI and the dot plot, if CPI and the dot plot are favorable to the expectation of rate cut, will Powell add fuel to the fire or lower expectations again with a slightly hawkish tone? This is also very important.
Summarize:
Time is too urgent, hurry up and prepare to publish, otherwise it will become hindsight. Tonight is destined to be a sleepless night. It is recommended that contract players be careful and wait and see. It is not ruled out that CPI and the dot chart are positive or negative. Lao Bao’s speech will give you the possibility of a reversal. After all, this is Lao Bao’s job, to adjust market expectations, neither too FOMO nor too pessimistic.
