China's Contribution to Realized Inflation

As China becomes more fully reopened yes their consumer base will be less restricted and spending but also their manufacturers will push up prices that are far more relevant on the headline inflation front than the core one. A widening divergence between headline and core inflation might become more relevant to trading early in the year than would otherwise be expected. We struggle to see a scenario in which it adds another 25 or 50 basis points on the journey to terminal but it certainly could contribute to a stronger case for holding terminal through 2023 and into 2024.