U.S. inflation hits a new 40-year high: time to call the peak?

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Nasdaq Composite is down 2.0% this morning after the Bureau of Labour Statistics said inflation was up 7.9% YoY in February – the hottest reading since early 1982.

U.S. inflation was in line with expectations

Compared to January, the consumer price index came in 0.8% higher. The numbers were roughly in line with expectations. According to E-Trade’s Mike Loewengart:

Inflation is coming in hot but there are no real surprises in this report. The market likely already priced the inflation increase in accordingly, and is instead intently focused on Ukraine and the downstream impact from commodities, which are already sending shockwaves through the market.

The U.S. Fed is expected to respond to inflation with a 25-basis points increase in interest rates at its policy meeting next week. In contrast, however, the ECB cited Russia-driven fears of stagflation as it left its key rates unchanged this morning.

U.S. inflation might not have peaked yet

Unfortunately, though, analysts are not too sure that February marks the peak for inflation.

Forecasts for oil prices go as high as $200 a barrel after the White House announced a ban on Russian energy earlier this week. On CNBC’s “Squawk Box”, former Dallas Fed President Richard Fisher said:

There are non-transitory forces at work here as well, mainly labour demanding higher wages. So, I believe inflation will go higher, it’ll last longer than consensus, and the only way to deal fight it is with tighter central banking, less accommodation. The Fed is behind the curve, they need to shift.

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