Inflation started increasing when the pandemic started, which should have been the opposite, and it doesn’t seem like it’s going to stop surging anytime soon. Today the ECB kept the hawkish bias, despite the conflict in Ukraine, and they are expected to stop the bond purchasing programme by Q3, after which rate hikes will start.

The FED has ended the QE and they are going to start increasing rates at next week’s meeting. Although there have been speculations whether the FED will hike by 25bps or 50bps. Today’s CPI inflation posted another increase, bringing the annualized rate to 7.9% which is the highest in 40 years. So, this might force the FED to start hiking with a bang which would help the USD further.

US February CPI Inflation Report

• February CPI YoY +7.9% vs +7.9% expected
• Highest reading in 40 years
• January CPI YoY was 7.5%
• CPI MoM +0.8% vs +0.8% expected
• Prior CPI MoM reading was +0.6%
• Real weekly earnings -0.5% vs -0.5% prior
• Full report

Core CPI Inflation

• Core CPI YoY excluding food and energy +6.4% vs +6.4% expected
• January core CPI was +6.0%
• Core CPPI MoM +0.5% vs +0.5% expected
• Prior core CPI MoM was +0.6%

Before the report was released, the market was pricing in an 11% chance of a 50 bps hike by the FED on next seek’s meeting. Now those odds should go higher.