The US inflation numbers released Tuesday (US time) were greeted with a degree of calm:
- US March CPI +2.6% y/y vs +2.5% expected
- US dollar comes under pressure with inflation not as hot as feared
RBC, though, is raising alarm bells (bolding is mine):
There is ... plenty of momentum in pricing and pricing intentions.
- The March small business survey (NFIB) showed 34% of firms plan to increase selling prices - unchanged from last month. The last time this metric was up here, headline CPI was printing well north of 5% y/y (and largely on the back of oil prices that shot up well over $100/bbl).
We know that energy is only part of the story this time around as evidenced by broad-based inflation non-energy inputs.
- Rising pricing intentions point to price pass-through of these rising inputs to end-user prices as the reopening takes hold. With consumers awash in cash the likelihood the price pass-through sticks seems elevated. As flagged by PPI consumer prices last week and NFIB now, the risk case for consumer inflation has a 5-handle on it.
"Transient' inflation is the consensus expectation at the Fed .... RBC says no ...
