First of all, affected by the high base effect, CPI and core CPI fell in April compared with the same period last year, but the decline was not as large as expected. On a month-on-month basis, core CPI rose 0.6% in April, indicating that inflationary momentum is still strong.Due to the high base in the same period last year, before the release of the data, the market generally expected that the growth rate of CPI and core CPI would slow down in April, so this time the inflation data mainly looked at month-on-month growth. The market had expected core CPI to grow 0.3% month-on-month, but it backfired and the final reading was 0.6%, the highest month-on-month growth in the past three months. In other words, the momentum of price increases has not slowed down, but strengthened.

From the itemized point of view, the prices of travel-related products have increased more, such as air tickets, new cars, hotels and so on. The price of second-hand cars also fell less than expected.The most prominent inflation data in April was air ticket prices, which rose 18.6% month-on-month, the highest month-on-month growth since 1963. This shows a substantial increase in consumer demand for travel.

The prices of other travel-related services are also on the rise, with dining out rising to 0.6% from 0.3% last month, and hotels up 2% from the previous month. The month-on-month growth rate of new cars rose to 1.1% from 0.2% last month, while second-hand cars fell 0.4% from the previous month, but the decline was narrower than that of the previous month.These data show that consumer demand in the United States is still strong and will be further released with the arrival of summer.

There are signs that house rents are rising faster.Rent accounts for 32% of the weight of the CPI basket in the United States, and the two most important items areLandlord equivalent rent (owners' equivalent rent) and main residence rent (rent of primary residence)The former is the rent that the landlord lives in according to the relationship between the rent and house prices of the surrounding houses, which accounts for about 24 per cent of the CPI basket, while the latter is the real rent paid by tenants, accounting for about 7 per cent.

According to the April data, the month-on-month growth rate of equivalent rent for landlords rose to 0.5% from 0.4% last month, while that of major homes rose to 0.6% from 0.4% last month, both of which showed an accelerating trend.

We have pointed out that rent inflation in CPI lags behind house prices and market real-time rental prices, which may mean that rent inflation will remain high this year because of the sharp rise in US house prices last year. In addition, according to a survey by the New York Federal Reserve, consumers' expectations for rent price growth in the coming year remained at a high level in April, and consumers' medium-term (3-year) inflation expectations also rebounded.

Food prices are more resilient, and falling oil prices have led to a fall in energy prices.Food grew 0.9% month-on-month in April, down slightly from 1% last month, but remained high. In terms of breakdown, the prices of dairy products (2.5%, the same as the previous month), non-alcoholic beverages (2%), meat, poultry, fish and eggs (1.4%), cereals and baked products (1.1%) increased higher.

After the Russia-Ukraine incident, global food and fertilizer prices are rising, and the impact on food supply and prices is gradually emerging. We expect food inflation to remain high in the future. On the energy side, affected by the fall in oil prices, energy commodity prices fell 5.4% in April from the previous month, of which gasoline prices fell-6.1%. As the situation in Russia and Ukraine has not been alleviated, energy prices have great uncertainty.

Us gasoline prices have hit a record high of $4.40 a gallon since May, meaning energy prices could rebound in May, according to the American Automobile Association.

Higher-than-expected inflation has once again damaged the Fed's credibility and could prompt it to reassess inflation.After the Fed's interest rate meeting last week, Powell told the market that the Fed was not actively considering raising interest rates by 75 basis points to allay market concerns about raising interest rates. Us stocks rose sharply that day, but fell sharply the next day. One explanation is that the market believes that Powell's statement lacks credibility, and it is hard to convince people that he hastily ruled out raising interest rates by 75 basis points before proving that the inflation risk is over.

With the release of CPI data in April and market fears confirmed, it is true that US inflation has not fallen back any time soon. While we don't think the Fed needs to raise interest rates by 75 basis points immediately, hasty exclusion of this option would damage the Fed's credibility, which Fed officials need to reflect on. look forward,We think the Fed is still likely to raise interest rates by 50 basis points in June, but the Fed needs to reassess the pace of rate increases in July and beyond in the light of the latest situation.

The risk of inflation has not been eliminated, and more reasons are needed for the "bear market rebound" in US stocks and Treasuries.Before the inflation data were released, investors were generally looking forward to a lower inflation data, which led to a rebound in US stocks and a fall in US bond interest rates. But yesterday's data seemed to disappoint the market. In the short term, we believe that while April inflation data may not lead to another big sell-off in US stocks and Treasuries, more reasons may be needed to achieve a sweltering "bear market rally".