Translate to English: A massive plunge to 532.4 billion? The watershed moment in

The Spring Festival is just around the corner, and the National Bureau of Statistics of China has released a significant set of inflation data.

On the other side of the ocean, facing China's CPI data, Powell might be envious.

However, in the face of the current economic data in the United States, Powell does not dare to easily decide to cut interest rates. With the significant reduction in the scale of overnight reverse repurchase operations, Powell may reduce the scale of quantitative tightening before cutting interest rates, and does not rule out the possibility of stopping the sale of U.S. Treasury bonds as soon as possible.

The economic trends between China and the United States have shown clear changes, and the watershed has already appeared.

First, let's take a look at the inflation data.

The CPI data for January released by the Bureau of Statistics has both good and bad news.

For us, we are not too worried about inflation at the moment, but we need to be vigilant against deflation. However, the latest January CPI fell by 0.8% year-on-year, and the year-on-year decline is significantly larger than last month, which is also the fourth consecutive month of decline.

Advertisement

But the good news is that the month-on-month increase is still ongoing, and it has been growing for two consecutive months.

The month-on-month increase indicates that prices are starting to rise, and the main reason for the year-on-year decline is the high base in the same period last year.

So we need to be vigilant about the current CPI data, but there is no need to worry too much.And for the United States, our CPI data makes Americans extremely envious.

Not long ago, the U.S. released the core PCE price index for December, which rose by 2.9% year-on-year, with a significant reduction in the increase, but still far above the target recognized by the Federal Reserve.

Next week, the U.S. will announce the CPI data. The last CPI showed a rebound, and whether this time's CPI can reduce the increase as the market expects is very important.

Since the inflation data has not yet fallen back to 2%, and the labor market data continues to perform very strongly, the U.S., which desperately needs to lower interest rates to stimulate the economy, is unable to implement a rate cut.

In fact, what is more urgently in need of a rate cut now is not American businesses or ordinary American families, but President Biden.

Biden needs to ensure that the economy does not fall into a recession this year, adding an important weight to his bid for re-election. Although Powell is willing to cooperate, he can only stand by for now.

However, the continuous decline in the scale of overnight reverse repurchase agreements may provide Powell with a new reason. The latest scale has fallen to 532.4 billion, while at the beginning of November last year, this scale was still over 1,000 billion.

The continuous decline of this data indicates that the liquidity in the money market is gradually drying up.

The Federal Reserve's monetary tightening includes raising interest rates and reducing the balance sheet. Interest rates cannot be lowered temporarily, and the Federal Reserve may consider reducing the balance sheet reduction. If it ultimately decides to reduce the scale of monthly U.S. Treasury sales, it can actually help alleviate the liquidity crisis.

In this situation, the United States appears very passive compared to China. China now has a relatively large space, and in addition to having just completed a round of reserve requirement ratio cuts, it is very likely that a reduction in the LPR interest rate can be seen soon.Moreover, there are now rumors that many banks are considering a new round of reductions in deposit interest rates.

Thanks to our very favorable inflation environment, there is still a lot of room for both monetary and fiscal policies.

The trends of the Chinese and American economies have already shown different directions, and it is estimated that they will become even more apparent in a few months.