CITIC Securities: US CPI Below Expectations, Weakening Rate Hike Outlook

CITIC Securities has reported that the US Consumer Price Index (CPI) for June came in entirely below expectations. This decline was attributed to falling retail oil prices and zero month-on-month growth in core services, indicating a weak secondary inflation effect. The firm believes US inflation is not sticky and that the overall year-on-year CPI has passed its current peak. They anticipate a gentle downward trend in the third quarter, reaching a bottom in September, before rising to a secondary peak by year-end and then declining rapidly by March next year. CITIC Securities maintains its forecast that the Federal Reserve will hold interest rates steady throughout the year. They suggest that rate hike expectations priced into derivatives have room for further downward revision. The report advises against allocating capital to US bonds at present, favoring short-term bonds over long-term ones. While the US dollar index is unlikely to sustain a significant rally, it is expected to find support. The technology sector remains an attractive investment theme for US equities.