Traders Forecast Annual US Consumer Price Gains

Traders have hiked their preliminary forecasts for US consumer price inflation over the next few months, and now widely see annual headline figures coming in at 7% or higher into early next year.

Fixings, which trade as derivatives on the likelihood of where future consumer price index levels will land, are at levels that imply headline year-over-year CPI prints of 7% in November and 7.3% each month from December through February 2022. Those would be the highest levels in almost 40 years.

With inflation already running at fast pace, supply chain is to blame for skyrocketing goods prices. For 10 years, the goods and services components of inflation have run separate courses.

While the services component of inflation held steady around 2.5% over the last decade, goods prices were disinflationary.

Then, in mid-2020, goods inflation spiked into double digits due to a combination of pent up demand and supply chain disruptions.

A surge of this magnitude is unprecedented in modern economic history and is pulling headline and core inflation up significantly.