ABN Amro: Haven't Yet Seen Peak Inflation

ABN Amro's view on the trajectory of US inflation has changed following the October CPI report: they now see inflation peaking in early 2022 close to 7.0%/core 5.0% (previously they thought the peak had passed).

• They saw the "surprise jump in shelter, medical, and other services" as representing to some extent catch-up from services weakness last year. That's particularly the case for housing rents, which "were essentially froze for months".
• Now, though, ABN Amro sees it likely that cost-push pressures are being passed onto consumers, including from wage growth.
• While our base case is that the first Fed hike will come in early 2023, market pricing for rate hikes is expected to remain elevated at least into early 2022, when we are likely to see a more convincing turn in inflation dynamics.