Inflation in the US again exceeded expectations, this time by a wide margin. Headline and core inflation rose to the highest levels in the past 30 years. Significant short-term momentum, as well as the looming Christmas shopping season, are making it possible for prices to rise 7% YoY in December. Given that there are no signs of a decrease in price pressure in production chains, starting from commodity prices, inflation expectations of households are on the rise, the Fed has enough reason to think about accelerating QE tapering and hint about an early rate hike.

The consensus forecast implied fairly high monthly inflation rate of 0.6%. The actual growth was 0.9%, which, of course, was a mini-shock for the markets, causing a reassessment of expectations. The Treasuries reacted strongly - with the 2-year bond yields bouncing up immediately, while the 10-year bond yields were somewhat belated. In other words, investor concerns about the persistence of inflation have grown, but with some delay:

The dollar also rallied in the wake of a rally in the 10-year Treasury yields, breaking through 94.50, which has been besetting since early October. On the technical side, the price has broken through the middle line of an ascending channel and can now target its upper border (96.00 DXY mark):

Earlier we discussed that high inflation in the US, in addition to widespread price pressures in supply chains, is also stimulated by low inventories, which greatly weaken the influence of competition in capping price growth. This means that retailers may not need to cut prices during the Christmas season, which, coupled with seasonally higher demand, promises to push inflation even further. Hence the speculation about 7% YoY in December.