ING: "US Inflation Surge Heaps Pressure On The Fed"

ING notes that price pressures appear to be broadening: "There were 0.3% or 0.4% MoM component readings throughout, suggesting broad inflation pressures."

• So "Yet another blowout inflation reading makes it increasingly difficult for the Fed to stick to its position that elevated inflation readings are merely "transitory". Pipeline cost pressures continue to build and corporates are looking to pass them onto customers in an environment of such robust demand. The case for a 2022 rate hike is strong."
• They highlight today's NFIB data showing "a net 47% of respondents currently raising their prices – the highest balance since January 1981 – with a net 44% of firms looking to raise prices further over the next three months." They also see shelter price pressures mounting in the coming months.
• "We continue to doubt the Fed's narrative that inflation is "transitory" and instead see the risks that it stays elevated for many more months...The key reason is that the stimulus fuelled economy is booming. Demand appears to be outpacing the supply capacity of the economy given the scarring that the pandemic has caused. We see no imminent end to the ongoing frictions such as supply chain strains and a lack of suitable workers."

Source: ING