CIBC: More Staying Power To Inflation, Fed To Hike In 2H2022

CIBC sees the Fed hiking as early as September on the back of surprisingly persistent inflation.

• "Monthly price pressures in areas not impacted by supply disruptions will still provide enough evidence of sustainable price pressures for the Fed to hike rates in H2 2022".
• There is further scope for an acceleration in shelter as house price moves feed through with a lag, although Covid-sensitive categories such as hotels and recreation could see some moderation in the short-term after new cases stopped decelerating in late October.
• "This reading implies that the Fed's preferred measure of prices, core PCE inflation, could have accelerated by several ticks to reach a minimum of +4.0% in October, or +2.7% annualized when eliminating base effects."
• "With the Fed set to finish tapering by mid-2022, they should be able to hike rates as early as September, followed by an additional 125bps through the end of 2023."