"Medium- to Long-Term Inflation Vigilance Remains, Fed Rate Cut Path to Be Maintained"

Daishin Securities forecasted on the 21st that although there is caution regarding medium- to long-term inflation, if the downward stabilization trend in housing costs continues, the U.S. Federal Reserve's (Fed) interest rate cut path will be maintained.

[Image source= Xinhua News Agency]

Last month, U.S. retail sales increased by 0.4%, expanding the growth rate compared to the previous month and still showing a robust performance. Durable goods sales, which had surged significantly in August due to discount promotions and seasonal demand, turned to a decline due to the base effect, but most other categories increased.

Lee Ha-yeon, a researcher at Daishin Securities, said, "U.S. consumption is expected to maintain a favorable trend until the end of the year," adding, "Recently, the National Retail Federation (NRF) projected that online sales during the year-end shopping season will increase by 8-9% compared to last year, indicating a still robust outlook." He continued, "Furthermore, the NRF suggested that the year-end shopping season period has shortened compared to before, which may lead to strengthened promotions such as discounts by retailers," and predicted, "Demand from low-income groups sensitive to prices may be higher than expected."

As strong consumer demand continues, market caution about inflation is rising, and concerns over expanded fiscal spending by the government ahead of the presidential election are also acting as upward pressure on inflation expectations. Moreover, both major parties in the next government are preparing policies that inevitably expand the fiscal deficit. In this context, the researcher stated, "Despite caution about medium- to long-term inflation, if the downward stabilization trend in housing costs continues, the Fed's interest rate cut path is expected to be maintained," adding, "Additionally, the easing of supply chain uncertainties, which temporarily expanded due to Chinese trade regulations, port strikes, hurricane issues, and Middle East geopolitical instability, is expected to partially offset demand-side inflationary pressures."