U.S. inflation to head even higher over next couple of months

Headline inflation jumped 0.8 percent month-on-month versus the 0.2 percent consensus, while the core (ex food and energy) component rose 0.9 percent versus the 0.3 percent forecast. This is the highest headline MoM reading since September 2009 and the highest core reading since 1981, notes ING in a recent report. It leaves the annual rates of inflation at 4.2 percent and 3 percent, respectively.

Inflation is likely to head even higher over the next couple of months as price levels in a vibrant, strengthening economy that has supply constraints, contrast starkly with those of 12 months ago when the economy was in lockdown and prices were being slashed in order to generate cash flow, according to ING.

Just 0.2 percent MoM readings for May will leave headline CPI at 4.5 percent and core at 3.3 percent — the risks are most definitely to the upside.

Admittedly, the annual rates should start edging lower as we move through third quarter and the economic extreme of