China International Capital Corporation: U.S. inflation may have entered a new phase, and the duration of inflation could be extended accordingly.

The research report from China International Capital Corporation suggests that the U.S. July CPI increased by 0.1% month-on-month and 3.4% year-on-year after adjustments, while core inflation rose by 0.2% month-on-month and 2.5% year-on-year, all in line with market expectations. Energy prices continue to decline, but since August, international oil prices have risen again, adding uncertainty to future energy prices. In terms of core inflation, goods are showing strength whereas services are lagging, especially in the prices of information technology products like computers and software, which continue to rise. This trend reflects a supply-demand mismatch brought about by the expansion of AI capital spending gradually being transmitted to the consumer end. We believe that U.S. inflation may have entered a new phase, where its driving forces are gradually shifting from supply shocks like tariffs and oil prices to demand expansion driven by AI investments, potentially prolonging the duration of inflation. For the Federal Reserve, this data alleviates the pressure for short-term interest rate hikes, but compared to supply-driven inflation, demand-driven inflation requires more attention from policymakers.