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

At 10:00 PM Beijing time on March 11, the U.S. February CPI data was released. The February CPI increased by 2.8% year-on-year, and the core CPI rose by 3.11% year-on-year. Inflation was slightly below market expectations. The Federal Reserve’s (FOMC) policy meeting is scheduled for March 17.

Industry insiders point out that the market’s focus has shifted away from this somewhat “outdated” data. Due to the closure of key shipping lanes, international crude oil prices surged in panic. Markets remain concerned that the year-on-year growth rate of the U.S. CPI in March and April could rise due to oil price transmission, with the U.S. dollar recently remaining relatively strong and volatile.

Some also believe that with countries releasing oil reserves for buffer and seeking “ceasefire” agreements, the overall impact on oil prices should be manageable. Expectations of Fed rate cuts may temporarily retreat, but the overall trend remains unchanged. The Fed is likely to hold steady at the March meeting, with the baseline scenario being a rate cut around June and two rate cuts within the year.

The Fed’s rate cut path also indirectly influences 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 unexpectedly weak non-farm payroll data and a decline in rate cut expectations, Hong Kong tech stocks plunged but have recently shown signs of stabilization, possibly reflecting market already pricing in pessimistic expectations.

Investors should closely monitor the potential rebound opportunities in Hong Kong’s growth sectors if Fed rate cut expectations rise again. 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