CITIC Securities: Expect the US CPI year-over-year growth rate to rise in March and April

CITIC Securities Research Report believes that the US February CPI fully met expectations, with core inflation showing moderate performance. However, market focus is no longer on this somewhat “outdated” data. In the baseline scenario where Iran conflicts ease in a few weeks or market reactions become muted, CITIC Securities expects the year-over-year US CPI growth rate to rise in March and April due to rising oil prices and compensatory rent inflation, respectively, then fluctuate around 3%.

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Overseas Macro | US CPI: Storm Clouds Gathering? (February 2026)

The US February CPI fully met expectations, with overall inflation remaining moderate. However, market focus has shifted away from this somewhat “outdated” data. In the baseline scenario where Iran conflicts ease in a few weeks or market reactions become muted, we expect the US CPI year-over-year growth to increase in March and April due to rising oil prices and rent inflation, respectively, then hover around 3%. The Federal Reserve does not need to overreact to oil price fluctuations. The US dollar may remain relatively strong and volatile in the near term, and the 10-year US Treasury yield lacks sufficient downward room.

Highlights:

US February inflation data was in line with expectations. The overall CPI year-over-year growth remained flat at 2.4%, with the month-over-month increase rising from 0.2% to 0.3%. Core CPI year-over-year remained at 2.5%, while the month-over-month growth slowed from 0.3% to 0.2%.

Before the Iran conflict outbreak, US inflation remained stable, with core inflation showing gentle signs.

In February, food prices rose 0.4% month-over-month, while energy prices, not yet reflecting Iran conflict impacts, increased 0.6% MoM, both higher than previous values. Core goods increased by 0.1% MoM from 0%, still very moderate, with clothing up 1.3% and used cars down 0.4%, both higher than before. Core services growth slowed from 0.4% to 0.3%, mainly due to a slowdown in the rise of airfares from 0.6% to 0.3%, excluding housing, which remained steady at a healthy 0.2%. We expect the US January PCE deflator to increase by 0.3% MoM overall, with core up 0.4%. Overall, this CPI report shows that US inflation was stable before the Iran escalation. However, with Iran conflicts intensifying in early March and the Strait of Hormuz potentially shutting down, market attention has shifted away from this somewhat “outdated” data to preparing for potential inflation risks.

The impact of recent oil price increases on March CPI is expected to be more evident.

Oil accounts for about 6.4% of US CPI. We estimate that a 10% rise in Brent crude oil prices corresponds to approximately a 0.13 percentage point increase in US CPI. The International Energy Agency (IEA) announced on March 11 plans to release 400 million barrels of oil into the market. Roughly, this is equivalent to about three weeks of oil shipments through the Strait of Hormuz at normal navigation levels. If the “military action lasting about four weeks” scenario materializes, the IEA’s release plan could help stabilize market panic. However, like recent volatile TACO expectations, oil prices may continue to fluctuate. If Brent crude prices rise from around $70 to about $90 per barrel and stay there, recent oil price increases could lift March CPI MoM by about 0.36 percentage points. We believe this increase is acceptable and unlikely to trigger a second round of inflation. If Iran’s situation eases in a few weeks and oil prices fall back, energy could become a drag on inflation.

In a baseline scenario where Iran conflicts ease in a few weeks, the Fed need not overreact to oil price swings.

Tariff impacts on core goods may weaken, and increased rental supply will limit rent inflation. A steady labor market suggests limited upside for super-core inflation. Our baseline is that US CPI year-over-year will rise in March and April due to oil prices and rent inflation, then stabilize around 3%. This “acceptable” inflation outlook means the Fed does not need to overreact to recent oil price increases. Its policy tightening thresholds will not be too high, and there is room for up to two rate cuts in the second half of the year. The US dollar, during the conflict, is likely to maintain a relatively strong and volatile stance, balancing “safe-haven + inflation” sentiments. The 10-year US Treasury yield, supported by steady economic growth, is unlikely to fall significantly below 4%.

Risk Factors:

• Iran situation evolving unexpectedly or other unforeseen events
• Overseas economic and inflation performance exceeding or falling short of expectations
• Global market liquidity or sentiment changing more than anticipated

(Source: People’s Financial News)