The autumn grain harvest is free from inflation, raising interest rates or self-defeating

CPI hits 3.5% is a temporary phenomenon. All macroeconomic data were released in August. The overall trend is good, basically in line with expectations. The purchasing managers' index has bottomed out after several consecutive declines, and the growth rate of industrial added value has increased slightly. Fixed assets The high investment stability maintained that real estate prices remained basically stable, urban and rural residents' consumption continued to increase, and currency liquidity increased steadily. Although the increase in food prices was relatively large, the ex-factory prices of industrial products continued to fall, indicating that the inflationary pressure was controllable.

After the release of the data, some economists once again mentioned raising interest rates on the grounds that inflation has exceeded expectations, and that there are still new highs in September. There is currently no risk of the economy bottoming out. Therefore, the focus of monetary policy should be shifted to “anti-inflation” and prevent the stock market from overheating again. And my point is:

The so-called “inflection point” of major macroeconomic data in August was mainly due to the positive understanding of the market on the decision of the Central Political Bureau meeting on July 22 to “solve problems in development.” Since July, regional revitalization, industrial rejuvenation, and the west Large-scale development, speeding up the construction of affordable housing, widening private investment channels and other policies have been gradually implemented. The effect has been significant. Since July, the stock market has rebounded, prices have held steady, commodity prices have risen, power generation has increased, and the heavy chemical industry has been “resting”. In the recovery, the macro economy has a soft landing. At the same time, due to the high incidence of disasters in various parts of China and the slight decrease in summer grain production, the market began to hype autumn crops and drastically reduced production, resulting in farmers reluctant to sell, and international and domestic grain prices have risen significantly.

It must be emphasized that inflationary pressures do exist, and that the prices of wheat, corn and rice in international markets have risen by about 40% since July, posing a constant pressure on rising food prices in China. However, the use of interest rate weapons may have no effect on the suppression of rising food prices. On the contrary, it will increase the cost of acquisitions, increase inflation expectations, and counteraction can not be underestimated. While the overall economy does not tend to “heat,” industrial products prices are still falling, Although the CPI touched 3.5%, challenging the bottom line of monetary policy, immediate interest rate hikes may hurt the overall economy, especially the newly-revitalized industrial economy.

Will prices continue to rise, and will there be hyperinflation? Mainly to see whether the autumn harvest can be harvested. In this regard, I recently went to the northeast for an inspection. Due to the small area of ​​the flood, the cold weather this spring and the high temperature weather this summer, and the cold weather in the northeast come late, corn, rice is currently rising very well, good harvest is expected, this year is expected to increase production of autumn grain. This will create counter pressure on the persistently high food prices. However, the price increase pressure is not mainly due to the price increase caused by the expected shortage of agricultural products. This year, the wages of front-line workers have generally increased significantly, and the purchasing power of food has increased. This factor will continue for a long time. Therefore, it is also unrealistic to expect the price of agricultural products to fall. Food prices rose 7.5% in August and will continue to rise in September. The best result is to maintain stable or slightly higher prices after the autumn grain market in September. The harvest of autumn crops is in sight, and the acquisition funds will increase substantially. It is difficult for the M2 to fall back to the planned control target in the next four months. This cannot be used as a reason to raise interest rates.

In August, the ex-factory prices of industrial products continued to fall, but the magnitude was small. Since the beginning of September, the state has strictly ordered all localities to achieve the eleventh five-year energy-saving emission reduction targets, leading to power cuts in some areas, steel prices have instead jumped, and commodity prices have rebounded, adding to pressures for price increases in the latter months. However, with the extension of energy conservation and emission reduction to downstream companies, the rebound of industrial product prices in early September is likely to be aborted. It is expected that industrial products will have negative pressure on prices in the next four months. We do not need to worry about the overheating of the overall economy.

The biggest controversy comes from the real estate market and the A-share market. Some economists are concerned about the proliferation of liquidity, leading to over-hype in the virtual financial market. My view is just the opposite. Real-estate market prices were basically stable in July-August. Under the high pressure of the policy, there was no significant increase in the market base. After September, the new real estate policy will face changes: whether a large number of idle land will be recovered, whether the accountability system can be implemented, and whether the property tax will enter the pilot program will test the market nerves, and the overall investment growth is likely to decline again. . I predict that with the further implementation of the Real Estate New Deal, the “Little Spring” in the real estate market from July to August will not contain the “Gold 9 Silver 10”. We don’t have to panic when prices in some cities rebound slightly, let alone use “high-end” weapons such as raising interest rates.

When it comes to the stock market, the bubble is even lower. Although some of the subject stocks have shown signs of speculation, many large-cap stocks are still at historically low levels. The market’s repeated resistance to the 2700 strong resistance has not been successful. At this point, we do not need to panic for the rise of the stock market, let alone take measures to suppress it.

Under the premise of "steady growth", "adjust structure"

The August data proves that the pattern of long-term “high growth and low inflation” in China’s economy has been broken, and it will enter the stage of “steady growth and inflation” in the future. Control is not good, and the possibility of stagflation in the short term cannot be ruled out.

There is little doubt that the price of agricultural products will continue to rise. It is only a matter of magnitude control. Since the overall situation of the increase in autumn grain production has been set, the possibility of a substantial increase has been ruled out. It is worrying whether industrial production and investment will rise and fall. After four months of industrial production will be subject to the dual suppression of real estate New Deal implementation and the enhancement of energy-saving emission reduction tasks, to achieve the goal must sacrifice GDP. After September, the completion of the “Eleventh Five-Year Plan” energy-saving emission reduction targets have entered a critical stage Many regions have large gaps and heavy tasks. Therefore, since September, many regions have forced power cuts. For example, Hebei Iron and Steel, although it has completed its energy-saving and emission-reduction tasks, because some areas in Hebei Province have not been completed, it will also have to "band-aid" production cuts by 20%. According to my investigation, there are a lot of such industrial enterprises, so the impact of power cuts is huge. This will have a negative impact on the industrial added value that has just gotten out of the downward trend, and it is likely to cause the September-October industrial output value to turn down.

In order to ensure that the economy does not enter the "stuck" cycle, "steady growth" and "stability policy" must be linked. If we want the economy to continue to pick up, the macro-control policies cannot be over-inflicted. Once the policy is fully tightened or superimposed in panic, the economy will continue to decline, and there will even be a double bottom. Obviously, the macro-control in the coming months will be more difficult. In order to control the spread of inflation risks, we must strictly implement the new real estate policies and strengthen energy-saving emission reduction efforts. However, if the intensity of control once out of control, is bound to suppress the macroeconomic just warming.

Therefore, it is recommended that we must continue to implement aggregate easing, structurally suppressed macroeconomic policies, monetary policy can not be tight, fiscal policy can not be tight, especially the agricultural credit policy should be relaxed, do not have to worry too much about money supply breakthrough the plan at the beginning of the year. At the same time, various policies on real estate control and the compression of backward production capacity must be implemented in a rhythmical manner. Treating them differently cannot be done across the board, and even indiscriminately, they must all be indiscriminately slammed into power cuts.

I still insist on the expectations of the previous months: The CPI exceeded 3.5% in August was structural and temporary, and should remain stable after the fourth quarter. CPI control is still within 3%; the industrial economy will not be overheated, and it is possible in September. Deceleration, currently unable to withstand interest rate hikes; the real estate market will continue to cool after September, on the grounds that the real estate New Deal will be implemented more strictly; the stock market is still in a weak rebound stage. There is no possibility of overheating in either the real economy or the virtual financial market. There is no need to raise interest rates. In the coming months, the focus of macroeconomic policies is to maintain stability and ensure the overall situation of “steady growth” and cannot create artificial shocks.