Week in review
- ECB cut rates by 25bps, in line with consensus
- U.S. CPI rose 0.3% m/m in November for both headline and core
- China headline CPI rose 0.2% y/y in November
Week ahead
- China November activity data
- U.S. Fed monetary policy decision, 3Q final real GDP
- Japan BoJ monetary policy decision
Thought of the week
China’s headline CPI grew 0.2% y/y in November, slightly weaker than 0.3% in October, almost entirely due to lower food prices (a normalization from supply disruptions in prior months). Core inflation rose slightly to 0.3% y/y, versus 0.2% previously. While prices look temporarily stabilized, concerns persist on overcapacity and weak domestic demand. The December 9th Politburo meeting delivered a stronger easing rhetoric, with wordings such as “unconventional” policies and “moderately loose” monetary stance garnering market attention, lifting Chinese equities. However, the China Economic Work Conference failed to offer incremental policy signals, causing the CSI 300, SSE Composite and Hang Seng Index to fall over 2%. The 10-year government bond yield also fell below 1.8%, reaching record lows, due to rate cut bets. We think China’s policies continue to head in the right direction (seeking alternative sustainable growth drivers, expanding support for domestic demand etc.), but policy coordination and implementation timeline remains uncertain. We will closely watch the March “Two Sessions” on the growth target, as well as policy details and approvals.
China’s Consumer Price Index (CPI) inflation
Year-over-year change
Market data