Inflation at 3-Year Highs

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CPI, though significantly understated, came in at 3.8% (0.6% MoM), sending interest rates higher and stocks lower.

We are meant to believe that commodities were flat month over month – hardly likely given the surge in prices for such inputs as diesel and fertilizer. Perhaps the worst part of the report, however, is the services inflation: 3.3% YoY and 0.5% MoM.

Even taken at face value, however, the trend is troubling. As we’ve said for the past several years, the bottoming of YoY gas prices meant the bottoming of inflation. Toss in a war that closes the Strait of Hormuz, and the result was inevitable.