BofA: Still Like 7 Hikes 2022

BofA see the CPI inflation report as providing another wake-up call for the Fed. They remain comfortable with their hawkish call for the Fed to hike seven times this year, beginning at the next FOMC meeting in March.

• In goods, there were solid increases in household furnishings & supplies, apparel, used cars, recreation commodities, medical goods and other goods. The only soft component was new cars, which was flat.
• “The widespread pressure across goods likely reflects ongoing supply chain constraints which have not yet shown signs of material improvement”.
• In services, rents stayed hot with rent of primary residence accelerating to 0.54% M/M, the strongest since Oct 1992 and likely underpinned by “tight labor markets and strengthening wage growth”. It could “continue to heat up in coming months”.
• Medical care services accelerated to 0.6% M/M, doubling from December, with hospital services spiking 0.5% M/M “as the surge in Omicron cases may have boosted payments”. Health insurance spiked 2.7% M/M and “physicians seemed to be unaffected by the Medicare cut this month”.
• Omicron seemed to have a mixed impact on travel prices. Lodging plunged -3.9% M/M and car/truck rental slid 7% M/M, but airline fares jumped +2.3% M/M.