A research report from China Merchants Securities indicates that US CPI rose 3.3% year-on-year in March, significantly higher than the previous month due to energy price pressures, but slightly below market expectations of 3.4%, primarily due to moderate core inflation trends. Following tariff reductions, the CPI goods component increased 0.1% month-on-month. The latest Federal Reserve meeting minutes noted that the main driver of core goods inflation is expected to shift from tariff impacts to rising oil prices. After the data release, the 2-year US Treasury yield briefly declined slightly as core inflation fell short of expectations, while the 10-year yield rose approximately 3 basis points to around 4.309%, and the US Dollar Index weakened to 98.62. The transmission of energy price shocks to core inflation remains unclear, and CME data continues to reflect a high probability of no interest rate cuts within the year.
Event: On April 10, 2026, the US Bureau of Labor Statistics reported March CPI increased 0.9% month-on-month (previous 0.3%), core CPI rose 0.2% month-on-month (previous 0.2%); CPI increased 3.3% year-on-year (previous 2.4%), core CPI increased 2.6% year-on-year (previous 2.5%). Key views from China Merchants Securities are as follows:
1) The overall US CPI energy component rose 10.9% month-on-month in March (previous 0.6%). Within this, energy commodity prices increased 21.3% month-on-month (previous 1.1%), with gasoline rising 21.2% (previous 0.8%) and fuel oil surging 30.7% (previous 11.1%). Energy services increased 0.4% month-on-month (previous 0.2%), with electricity rising 0.8% (previous -0.7%) and utility gas service declining -0.9% (previous 3.1%). As of April 9, Brent crude prices had climbed to $132 per barrel. Despite ceasefire negotiations in the US-Iran conflict, factors such as damaged energy infrastructure and uncertainties surrounding navigation through the Strait of Hormuz continue to drive oil prices higher. As the US enters its peak travel season, the CPI energy component will face increased pressure.
2) Food prices remained moderate, with no signs of supply chain pressure transmission. The food component was flat month-on-month in March (previous 0.4%), with food at home declining -0.2% (previous 0.4%) and food away from home rising 0.2% (previous 0.3%). As of March 31, the CRB Food Price Index increased to 494.12, up 4% from the beginning of the month, which is expected to contribute to a moderate rise in the CPI food component.
3) Core CPI increased 0.2% month-on-month in March (previous 0.2%), below market expectations of 0.3%. Service inflation slowed, consistent with the cooling wage growth indicated in the March non-farm payroll data. The shelter component rose 0.3% month-on-month (previous 0.2%), with owners' equivalent rent increasing 0.3% (previous 0.2%) and rent of primary residence rising 0.2% (previous 0.1%). Away-from-home lodging increased 0.2% (previous 1.0%); other lodging away from home, including hotels and motels, rose 0.2% (previous 1.1%). With rising oil prices, airfare increased 2.7% month-on-month (previous 1.4%). The overall services component of CPI rose 0.2% month-on-month (previous 0.3%), with medical care services flat (previous 0.6%) and transportation services up 0.6% (previous 0.2%). Motor vehicle insurance slowed to 0.0% (previous -0.3%).
4) The CPI goods component (excluding food and energy) increased 0.1% month-on-month in March (previous 0.1%). Within this, new vehicles rose 0.1% (previous 0.0%), while used cars and trucks declined -0.4% (previous -0.4%). Following tariff reductions, household appliances fell -1.6% (previous 3.1%), and furniture and bedding declined -0.4% (previous 0.0%). Apparel increased 1.1% (previous 1.8%). According to the latest Federal Reserve meeting minutes, the primary driver of core goods inflation is expected to shift from tariff impacts to rising oil prices, while core services inflation is mainly benefiting from slowing shelter inflation.
Following the data release, the 2-year US Treasury yield briefly fell approximately 3 basis points due to core inflation missing expectations, before rebounding to around 3.79%. The 10-year yield rose about 3 basis points to near 4.309%, and the US Dollar Index weakened to around 98.62. The transmission of energy price shocks to core inflation remains uncertain, and CME data still indicates a high likelihood of no interest rate cuts within the year.
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