a combination of unrelated factors is raising the likelihood that higherthannormal us inflation could turn durable lasting anywhere from a few years to a full decade according to investors bracing for next week’s latest update on price gains  traders expect thursday this coming week to bring the first in a string of annual consumer price index headline figures close to or above 8 derivativelike instruments known as “fixings” imply the yearoveryear rate for february is likely to be 79 followed by 83 for march and 8 for april that would be the longest stretch of such high readings since september 1978 to january 1982 when the us stagflation that lasted a decade wound down russia’s attack on ukraine in the past week has shifted the calculus by putting a much longer stretch of high us inflation firmly within the realm of possibilities the war is creating havoc in oil markets roiling commodity prices and trickling down to american consumers at a time when the inflation rate is already at a 40year high of 75 earlier this week us crude oil topped 116 a barrel for the first time in over a decade exacerbating other inflationary forces under way during the pandemic they include persistent labor shortages and rising wages a higher cost of shelter and even higher energy prices driven by climate change add to this a federal reserve reluctant to deliver aggressive interest rate hikes for now given the central bank is loathe to tip the economy into a recession  “stagflation has absolutely become more likely with growth being impeded by a variety of factors that already existed coming into the year” said david spika president and chief investment officer of guidestone capital management which manages 182 billion from dallas “ukraine has compounded that”  traders policy makers and economists alike are all counting on inflation to trail off this year while persisting above the fed’s 2 target however many have turned out to be wrong for months and inflation has yet to show signs of peaking  fed chairman jerome powell has assured policy makers of his support for a quarter percentage point rise in benchmark interest rates this month which would lift the fed funds rate target to between 025 and 05 though he says central bankers are prepared to do more if needed however policy makers are somewhat hamstrung from executing more aggressive rate hikes right away given the chances of an economic slowdown meanwhile some investors remain hopeful that plans to shrink the fed’s almost 9 trillion balance sheet can complement rate hikes though the precise impact of socalled quantitative tightening is a matter of debate   “our basecase view is that as long as the economy avoids a recession we think sustainable sticky inflation north of 3 is likely to stay for more than a year” guidestone’s spika said via phone “we could see an extended period of inflation if the fed does not respond forcefully enough though i wouldn’t rule out the impact that significant balancesheet reduction could have”  read ‘stagflation’ is coming what you need to know  traders currently see a betterthan50 chance the fed will lift its main policy rate target to 15 to 175 or higher by yearend but that’s not nearly enough to get serious about inflation rich kelly of td securities an arm of torontodominion bank td  says the central bank would need to hike the fed funds rate target by 800 basis points immediately to match its typical reaction function relative to past decades and bank of america bac rate strategists say a formula known as the taylor rule suggests the fed funds rate target should already be above 6 not everyone is convinced the us is headed for stagflation or stagnant growth combined with high inflation kevin flanagan head of fixed income strategy at new yorkbased wisdomtree investments wetf  says he’s “on board with the ‘flation’ part of that” word but thinks “we are going to avoid the ‘stag’ part” as the us economy expands 3 to 4 in 2022 inflation should persist at 3 or higher for the next 12 months he says though it’s also “fair” to say price gains could stay elevated for the next two years in the meantime flanagan says he’s relying on twoyear treasury floating rate notes usfr as one way to mitigate the risk of higher rates    “the commodityprice shock is a new and a potent driver of higher inflation and we’re still in the early innings of trying to understand what that means for the us outlook” said bill adams the toledo ohiobased chief economist for comerica inc cma    “it’s easier to imagine us getting into a stagflationary scenario than it was prerussia and ukraine but that’s not my base case” adams said via phone “my base case is that we see high inflation over the next few months before cpi falls off to 4 yearoveryear in the fourth quarter as the pandemic fades labor force participation rises and shortages ease we could see disinflationary effects play out russiaukraine is clearly inflationary it’s just a question of the magnitude and persistence of the shock”  thursday’s cpi report is the most important potentially marketmoving data due next week landing during the traditional media blackout period for fed speakers ahead of the central bank’s march 1516 policy meeting   monday brings january data on consumer credit followed by tuesday’s release of the nfib smallbusiness index and a revision to wholesale inventories data on job openings and quits are due wednesday and weekly jobless benefit claims are published thursday followed by friday’s release of the university of michigan consumer sentiment index and a preliminary reading of fiveyear inflation expectations  “everyone is fearful of a 1970’s style wageprice spiral with wages being one of the most durable elements of inflation” said eric leve chief investment officer at bailard a 56 billion asset and wealth manager in the san francisco bay area he says “a reasonable goal” for inflation “is 3 long term for the next decade”  “this year will test the mettle of central bankers around the world” he told marketwatch “the question for them is how do you deflate the economy in a way that doesn’t create a growth shock”