Daily summary of investment bank/institutional views (2024-04-11)

Mini Program: Daily summary of investment bank/institutional views

1. Goldman Sachs: The interest rate market needs to seriously consider the possibility of long-term high interest rates

Goldman Sachs analyst Lindsay Rosner: The interest rate market needs to seriously consider the possibility that interest rates will remain high for a longer period of time, at least until this summer, and possibly until the end of this year. The inflation figures have not weakened the Fed's confidence, but have cast a shadow on it.

2. Goldman Sachs: The Fed will cut interest rates for the first time in July and abandon the imminent rate cut in June

After the CPI data, Goldman Sachs was ahead of the investment banks in adjusting its expectations, predicting that the Fed's first rate cut will be in July, not June. Previously in January, Goldman Sachs expected the Fed to start cutting interest rates in March, and a total of five rate cuts this year. After the Fed's meeting in early February, Goldman Sachs postponed the Fed's first rate cut to May, and continued to expect five rate cuts this year. In late February, Goldman Sachs no longer expected the Fed to cut interest rates in May, and expected four rate cuts this year. In March, Goldman Sachs said that the Fed's June rate cut was imminent, and a rate cut in May did not seem to be under consideration, and it was expected to cut interest rates three times this year, not four.

3. JPMorgan: The market may price in the Fed not cutting interest rates, and downgrade emerging market currencies to "hold"

JPMorgan Chase downgraded its view on emerging market currencies and local interest rates after the U.S. CPI rose more than expected in March, leading financial markets to expect the Federal Reserve to delay its rate cut until September. "At this point, the probability of the Fed not cutting interest rates becomes large enough that markets will reprice, pushing up risk-free rates and limiting the performance of emerging market currencies or the ability of emerging market rates to continue to resist increases," JPMorgan Chase said. JPMorgan Chase said it has adjusted its weight in emerging market foreign exchange to "hold" from "overweight" previously.

4. Standard Chartered: Inflation is stubborn, and the Fed is expected to cut interest rates only twice this year

Standard Chartered strategists now expect the Fed to cut interest rates only twice this year, rather than four times, after Wednesday's release of higher-than-expected U.S. core consumer price index data. Steve Englander, head of global G-10 foreign exchange research at Standard Chartered, wrote in a report on Wednesday that the bank predicts that the Fed will cut interest rates twice in 2024, each time by 25 basis points, and expects that the rate cuts may start in July. Englander wrote: "The high core and super core data in March increase the possibility that inflation will prove more difficult to curb than the Fed imagined. We have pushed back expectations for the first rate cut, but also see the possibility that stubborn inflation will shift the question from 'when' to 'if'."

5. Barclays: Once again predicts that the Fed will only cut interest rates once this year

Barclays economists cut their forecast for the Fed to one rate cut this year, possibly in September or December, after higher-than-expected inflation data. "We no longer believe the FOMC will be comfortable cutting rates every few meetings starting in June," Marc Giannini and Jonathan Millar said in a report. Barclays predicted late last year that there would be only one rate cut in 2024, in December. The bank has since adjusted its expectations several times, most recently predicting a total of three rate cuts by 25 basis points in June, September and December.

6. BlackRock: The Fed’s interest rate tools are not keeping up with the times, and interest rate cuts may be made at the end of 2024 or later

Rick Rieder, BlackRock's global head of fixed income, said the Fed may start cutting interest rates in late 2024 or later. Rieder said that sticky inflation is a big problem facing the Federal Open Market Committee. The reason why inflation is so sticky is that the world has clearly shifted to the service industry, especially experiential consumption, and you can see the same dynamics in the amazing prices people are willing to pay to participate in activities or be with other people. Therefore, we see today's data showing that service inflation is still extremely sticky. Finally, he also explained that a key factor to understand here is that many of these areas are not very sensitive to interest rates, so the Federal Reserve faces a very difficult task in lowering these price levels through the blunt tool of policy interest rates.

7. TD Securities: Postponed the forecast of the first Fed rate cut to September

Strategists at TD Securities said that due to the disappointing CPI released yesterday, the Fed is now expected to start cutting interest rates in September with a 25 basis point cut, followed by another rate cut in December. Previously, the bank expected the first rate cut to occur in June. The bank's strategists said that the unexpectedly strong growth in underlying inflation so far this year has been disappointing, which may cause the Fed to increase the evidence it wants to see before easing policy this year. Not only do we now think that a rate cut at the June meeting is extremely unlikely, but we also think that inflation is unlikely to meet the threshold required for a rate cut in July.

8. Goldman Sachs: US auto prices will fall across the board, with housing costs rising slightly

The CNBC article pointed out that there will be several key areas to watch in the US CPI report on Wednesday. In addition to the overall data, trends in items such as housing, airfare and car prices are also important. These areas have been the weather vane in the current economic cycle, and no matter how they go, they may indicate longer-term trends. Goldman Sachs economists expect that prices of goods related to air travel and cars will fall across the board, and housing costs will rise less, accounting for about one-third of the CPI weight. However, a survey released by the New York Federal Reserve on Monday showed that people's expectations for rental costs in the next year have risen sharply, which is bad news for policymakers because they often use falling housing costs as the cornerstone of their argument to ease inflation.

9. Jefferies: Even if the Fed doesn't cut rates, the stock market will rise

David Zervos, an analyst at Jefferies, said traders spooked by Wednesday's higher-than-expected inflation data need not worry. Risk assets can thrive regardless of whether the Federal Reserve cuts rates. The S&P 500 fell more than 1% on Wednesday after the latest U.S. CPI renewed concerns that the Federal Reserve will delay rate cuts. However, U.S. stocks are likely to continue to rise on the basis of positive economic news. Zervos expects the positive news to overshadow talk of keeping interest rates higher for longer. He said the market's pricing in six rate cuts by December in early 2024 was "almost as stupid" as the two rate cuts expected at the beginning of last year.

10. Commerzbank: The gold market may be in a rational bubble

Gold prices fell slightly after better-than-expected U.S. job market data last week, but quickly recovered as investors may see it as a buying opportunity, analysts at Commerzbank wrote in a report. The divergence between gold prices and rate cut expectations has widened, which may be driven by investors' expectations of further gains in gold prices. This makes buying the asset to lock in gains a rational decision. The report said that the gold market is more likely to experience a rational bubble because fundamental factors are more difficult to assess, although U.S. interest rates remain a key driver.

11. TD Securities: The ECB's June rate cut has been digested, and interest rates are unlikely to rise again

TD Securities strategists Lucas Krishan and Pooja Kumra said in a note that the market has already priced in the ECB's June rate cut well, so further rate increases are likely to be limited. In their base case scenario, the ECB will keep its statement largely unchanged while reiterating the importance of economic data to the ECB's policy stance. The strategists added that they favor positions on the steepening of the 2-10 year German Bund curve.

12. TD Securities: The Bank of Canada will not rush to cut interest rates before July

TD Securities analysis said that Canada has taken another step on the road to rate cuts, but how much evidence of weakening price pressures is enough for the Bank of Canada to cut interest rates is a bit like a guessing game. TD Bank strategists said that Canada's GDP growth rate is expected to be 1.5% in 2024, and the year-on-year increase in core CPI is still above 3%, so the central bank may not feel too much pressure to cut interest rates immediately. They also pointed out that the Bank of Canada may be more likely to make hawkish mistakes and maintain interest rates for too long, rather than dovish mistakes and cut interest rates too early. Therefore, although the June meeting may be the focus, TD Securities still expects the Bank of Canada not to cut interest rates until July.

13. Danske Bank: Higher-than-expected US inflation will strengthen the dollar

Mohammad Al-Saraf, assistant FX and rates strategist at Danske Bank, said in a note that if U.S. inflation data for March comes in higher than expected, this should boost the dollar. If the monthly core CPI rises by 0.4% or more, it could increase confidence that the Fed will maintain its current stance for longer, especially given the strong employment data in March. This could boost the dollar within the G-10. He also noted that U.S. CPI has already exceeded expectations in the first few months of this year.

14. Deutsche Bank: US inflation data is crucial to measuring sticky price pressures

Deutsche Bank economists said in a note that Wednesday's U.S. inflation data is critical, and if it's the third consecutive strong reading, it will become increasingly difficult to interpret price pressures as just temporary. They said the 0.4% monthly increase in the core CPI in both January and February led to concerns that price increases could eventually remain above target. But the Fed didn't sound too concerned about that, with Fed Chairman Powell saying last week it was too early to say whether recent data represented more than just a bump. However, hawkish Bostic said on Tuesday that he expected only one rate cut this year, but did not rule out two or zero cuts.

15. New Zealand ASB Bank: The Reserve Bank of New Zealand may maintain a tight policy stance until 2025

Mark Smith, senior economist at ASB Bank in New Zealand, said that the Reserve Bank of New Zealand has made progress in keeping inflation below 3% for a sustained period, but the work is not yet done. Data this year will become increasingly important, and the monetary policy statement in May will provide more updated data and a full round of policies to consider policy settings. ASB Bank believes that the Reserve Bank of New Zealand will not consider cutting the official cash rate (OCR) until it is convinced that inflation below 3% can be achieved and maintained. It is conceivable that the bank may start cutting interest rates as early as the November meeting, and it seems more likely that the monetary policy setting will remain neutral and restrictive for about a year.

The article is forwarded from: Jinshi Data

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