Still transitory?

Inflation continues to surprise to upside

Chart of the Day

The big news yesterday was the unexpectedly large rise in headline and core inflation. Many are making the case that the rise in inflation is due to transitory factors, which will eventually reverse. But even the alternative measures of core inflation, like the Cleveland Fed trimmed mean measure, are now very high as well. That measure excludes items that have risen, or fallen, very sharply in price and so basically excludes many of the items that are rising sharply in price currently like used cars. Despite excluding those things, it too has risen sharply to 2.9%.

MacroInflation is the highest since 2008.

The surveys suggest this is close to the peak.

The further rise was in large part due to a jump in used vehicle prices.

Markets

US yields rebounded on the news, but not by that much considering how large the miss was.

There were larger moves in the FX market, but mainly for the US against the EM currencies.

The cyclical advanced economy currencies have been slowly drifting down against the USD, not normally a good sign for global growth.

Lumber continues to collapse.

While some commodities are dropping back in price, container costs are still vert high.

The 10-year yield has fallen, even as the copper/gold ratio has been relatively stable in the past couple of weeks.

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