The March 2021 CPI data (released in April of last year) showed the largest monthly increase in the prices in over a decade. The 2.7% yearly change in the CPI at that point was dismissed as being due to base effects written off as transitory. Some were even talking about how an uptick in inflation would be welcome. It has proven to be neither unduly influenced by base effects nor transitory. As inflation has continued to move higher and the Fed has belatedly attempted to bring it under control, neither stocks or bonds have responded favorably. The S&P 500 is down 3% since April 2021 and the aggregate bond index is down 8.5%. Commodities, however, have flourished, rising more than 77% in that time period.
The details of today’s inflation report suggest price pressures remain prevalent. The Fed will likely have to intensify its inflation-fighting efforts. Whether from the Fed, the current Administration or the private sector, folks who were dismissive of inflation in Spring 2021 should have their current perspectives taken with a grain of salt.
