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The change in consumer price index (CPI) since last month came in at 0.6%, above the 0.4% expected. Meanwhile, the so-called Core CPI, which excludes food and beverages, came in at 6% year-over-year.
The rise in CPI was the largest since February 1982, while the rise in Core CPI was the largest since August the same year, the US Bureau of Labor Statistics wrote.
Ahead of the release of today’s inflation data, White House spokesperson Jen Psaki had already said that they expect the number to be “high,” and that a year-on-year number of above 7% “would not be a surprise.”
Continued higher-than-expected inflation numbers in the US are now also causing some analysts to rethink whether the Federal Reserve will hike rates by 0.25 percentage point per hike, as is widely expected, or if some of the hikes this year will be 0.5 percentage point.
“If we don’t start gliding lower in line with expectations soon, the market is going to be pricing some 50bps Fed hikes into the equation for 2022,” Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank, said in a comment ahead of today’s inflation data, according to Reuters.
The same sentiment was also shared in a note by Morgan Stanley analysts, including the bank’s Global Head of Macro Strategy Matthew Hornbach.
“[…] an upside surprise next Thursday would mean further talks of the Fed raising rates 50bp in March. At a minimum, calls for the Fed to hike at every meeting this year will look much less off-base,” the note said.
Meanwhile, European banking group Nordea said in a note published yesterday that they expect year-over-year inflation to come in at 7.4%, above the 7.2% consensus among analysts.
This “could translate into a small selloff in bonds, wobbly equities and a supported dollar,” the bank wrote yesterday.