US inflation rises again. In March it reached + 8.5% year on year from 7.9% the previous month. This is the highest rate of growth since December 1981. The markets are starting to think about the possibility that the peak of price growth is near “US inflation has reached a new high in 40 years, but we are approaching the peak” , confirms James Knightley, Chief International Economist of Ing. “Unfortunately – – continues the expert – the descent will be long and slow due to persistent supply chain problems, significant rigidity in the labor market and the pricing power of companies in progress. That means the Fed needs to raise rates quickly, with a growing possibility of a sharp slowdown. ”
What will the Federal Reserve do in the coming months? Ing expects it will act aggressively to enforce restrictive policies in order to regain control of the inflation narrative. In May, June and July the hikes could be 50bps and once the proposed quantitative restriction takes hold, the hikes should retaliate to 25bps.