U.S. February inflation data shows a moderate performance; the Federal Reserve's March policy meeting may hold steady

Beijing Time, March 11 evening, the U.S. February CPI data was released. The February CPI increased by 2.8% year-on-year, and core CPI rose by 3.11% year-on-year. Inflation was slightly below market expectations. The Federal Reserve’s (FOMC) interest rate decision meeting will be held on March 17.

Industry insiders point out that the market’s focus is no longer on this somewhat “outdated” data. Due to the closure of key shipping routes, international crude oil prices surged in panic. The market remains concerned that the year-on-year growth rate of U.S. CPI in March and April may rise due to oil price transmission, with the U.S. dollar recently remaining relatively strong and volatile.

Some also believe that as countries release oil reserves for buffer and seek a “ceasefire,” the overall impact on oil prices is manageable. Expectations of Fed rate cuts may temporarily retreat, but the overall trend remains unchanged. The Fed is highly likely to keep rates steady at the March meeting, with the baseline scenario still indicating rate cuts around June and two cuts within the year.

The Fed’s rate cut path also indirectly affects emerging markets, including Hong Kong and A-shares, especially the offshore market with a high proportion of foreign investment like Hong Kong stocks, which are more sensitive to dollar liquidity. After weak non-farm payroll data and a decline in rate cut expectations, Hong Kong tech stocks once fell sharply but have recently shown signs of stabilization, possibly reflecting market already pricing in pessimistic expectations.

Investors should closely monitor the opportunity for the Hong Kong growth sector to recover from lows after expectations of Fed rate cuts rise. Related ETFs include Hang Seng Tech Index ETF (513180.SH), Hong Kong Stock Connect Tech ETF (159101.SZ), and Hang Seng Healthcare ETF (159892.SZ).

Daily Economic News