shoppers browse in a home depot building supplies store while wearing masks to help slow the spread of coronavirus disease covid19 in north st louis missouri us april 4 2020 picture taken april 4 2020 reuterslawrence bryantfile photo new york nov 10 reuters  us consumer prices increased more than expected in october as the cost of gasoline and food surged leading to the biggest annual gain since 1990 further signs that inflation could remain uncomfortably high well into next year amid snarled global supply chains the consumer price index rose 09 last month after gaining 04 in september the labor department said on wednesday in the 12 months through october the cpi accelerated 62 that was the largest yearonyear advance since november 1990 and followed a 54 jump in september stocks sp emini futures extended a slight loss and were last off 031 pointing to a weak open on wall street “it’s tough for policymakers to ignore this report because the gains were so broadly distributed it’s somewhat funny one of the only things that did go down was alcoholic beverages so at least consumers can drown their sorrows from higher prices “we may start to see some deceleration in food prices in the months ahead because yesterday’s ppi report showed declines at the final and intermediate stage of processing food “it might still be too early to say if inflation will remain elevated but one factor that is likely to continue to contribute and to contribute in a material way to elevated cpi readings are housing costs which are related to rental rates housing costs are by far the largest percentage component of the cpi index shelter accounts for just under 33” randy frederick vice president of trading and derivatives for charles schwab in austin texas “we havent seen as big of an increase in cpi as we have in ppi which tells me that corporations have been absorbing a portion of that additional cost themselves which impacts their margins and profitability but eventually that has to be passed on if ppi numbers keep rising so the fact that weve had high ppi numbers gave us some insight into the fact that we were going to get higher cpi and theres still a lot of room there which tells me we’ll have higher inflation again next month as well” “these numbers have brought the probability of a rate hike in june up a little bit but it wont bring it any closer than june” “the most meaningful trend i think is the flattening of the curve as the market is kind of assuming a more aggressive normalization path from the fed” “what we heard from powell at his press conference last week seems to suggest that for the time being they’re still crediting the upside in inflation to more supplyside issues and so they are opting to remain patient until some of those supplyside concerns start to work themselves out in the middle of next year” “at this point the flatter curve seems to be pointing to more aggressive fed action so i think that’s going to be the primary story probably over the next several months or even the next quarter or two” “inflation hawks probably aren’t surprised by this the inflation came in higher than expected and bond investors need to be compensated for the purchasing power risk already real rates are near record lows at some point the bond market is going to realize they’ve been a punching bag in this whole market and they’ll demand some kind of compensation” rick meckler partner at cherry lane investments in new vernon new jersey “it’s got to be disconcerting for the bond market to see a cpi number like thiswhat really is the biggest worry is that the bond market reacts to the point where it does finally become some competition for stocks and i think were still a ways away from that even though the fed believes that inflation is transitory the evidence is starting to add up that thats not true but my guess is theyll stick with their plan at least for several more months” “the data is a negative for the market but probably not the type of negative it might have been years ago as retail investors continue to clamor particularly for technology stocks the fed has made very few moves outside of what theyve told the markets they plan to do but i think even theyve got to be a little concerned by the strength of the increase” peter cardillo chief market economist at spartan capital securities in new york “what do these numbers say simply that inflation is going to be longlasting and structural inflation has picked up speed these yearonyear numbers the highest i believe in about 21 years the bottom line is that this is going to be a real challenge for the fed in the coming months and suggests that inflation has not peaked its going to lift the eyebrows of the fed inflation will peak probably in the beginning of the second quarter and over the next several months the fed will have to change its tune a little bit and accelerate the pace of tapering” this report is somewhat concerning in terms of the trend we had been expecting higher inflation we had been expecting a bit of a hotter month in october but this surpassed our expectations so were on a firmer trajectory in terms of inflation and i think things will continue to get worse before they get better in terms of the inflation outlook because we dont see core inflation peaking until sometime in early 2022 from the feds perspective it puts additional pressure to consider earlier tightening of its monetary policy this does not create an immediate force to lead them to tighten but it does increase the pressure “it’s clear that the rate of inflation and the persistence of elevated inflation are much more than what policymakers and markets had expected counterintuitively the higher inflation goes the more the market believes this will dent real income and in effect slow the economy which to me is the wrong way of thinking but that’s how the market is going to approach this the problem with elevated inflation is the longer you have it the more likely it becomes ingrained and a the less likely even with a significant weakening of gdp growth short of a recession will change that new dynamic” it is not supply it is demand the numbers today us and globally are showing that what we have is a demanddriven inflation that can be curtailed with higher interest rates and the fed is behind the curve they may now be forced into raising rates sooner rather than later interest rates are going up the yield curve is flattening and so growth stocks are relatively poorer performers while value is doing well with better numbers for some of the commodity stocks financials healthcare industrials basic materials