NEW YORK, July 13 (Reuters) – U.S. consumer prices accelerated in June as gasoline and food prices remained high, leading to the largest annual increase in the inflation in four decades and advocated for a 75 basis point interest rate hike by the Federal Reserve. later this month.

The consumer price index rose 1.3% last month after rising 1.0% in May, the Labor Department said Wednesday. In the 12 months to June, the CPI jumped 9.1%. This is the largest increase since November 1981 and follows an 8.6% increase in May. Read more

MARKET REACTION:

EQUITIES: S&P 500 futures fell sharply and fell 1.6%, indicating a nasty open on Wall Street

BONDS: US 10-year yields rose to 3.0524%; Two-year yields hit 3.1775%, deepening the 2s/10s yield curve inversion to over 13 basis points

FOREX: The dollar index rose 0.21%

COMMENTS:

QUINCY KROSBY, CHIEF EQUITY STRATEGIST, LPL FINANCIAL, CHARLOTTE, NC:

“The market was expecting a higher print. The president mentioned inflation yesterday when he was speaking. That’s usually an indication that concern has escalated for the administration. But no one was expecting over 9%… The Fed has been clear almost since the end of the last Fed meeting, 75 basis points are coming at the end of July… It was well telegraphed. market has also suggested that we are close to a peak or plateau in inflation. We are starting to see lower prices in commodities, freight and shipping, and supply chain challenges. supply seems to be easing at the margin, which should lead to lower prices… More important will be the preliminary consumer sentiment report that will come out.The question now is, is 1% now on the table and topic for discussion?

ANTHONY SAGLIMBENE, GLOBAL MARKET STRATEGIST, AMERIPRISE FINANCIAL, TROY, MICHIGAN

“The market has been bracing for a hot number all week. I don’t think it’s a surprise that the number has come in hot. During the week, investors have priced in that we will have a hotter print. Now that we have it, it shows that inflation has not peaked yet.The market wants to see at some point that inflation is going to peak.

“Higher inflation equates to a more aggressive Federal Reserve. Powell is going to see a spike in inflation, which could be in July. That means the Fed is going to continue to be aggressive, and right now the Fed is not not your friend, at least from an investor perspective and until that changes it will be difficult for stocks to gain traction.

EUGENIO ALEMAN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA

“Underlying inflation was expected to remain below 9%, so that was not a good number. In some respects, gasoline prices were expected to be very very high at the beginning of the month. By mid-June this changed considerably, but it still seems to have affected prices considerably more than anyone expected. The good news is that July inflation does not won’t be so bad because oil and gasoline prices have come down.” I believe this is the peak. Even if it is the peak, the risks remain because the war between Russia and Ukraine continues and any surprises could impact the oil market and this will continue to be a risk in the future. The risk for continued and higher inflation remains there simply because of the uncertainties of the war.” “This reinforces our view that the Fed will raise rates by 0.75% at the end of July meeting. The Fed needs to show they have this under control and they can’t go back.”

MICHAEL PEARCE, SENIOR US ECONOMIST, CAPITAL ECONOMICS, NEW YORK

“The stronger-than-expected 1.3% rise in consumer prices in June, pushing headline inflation to 9.1% from 8.6%, caps another 75 basis point rise at the meeting July, but with the sharp fall in commodity prices since then and moderating wage growth in recent months, the outlook for inflation does not look as gloomy as it did a month ago. speculation of a 100 basis point hike this month seems misplaced.

CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE, NC

“This morning’s number is unbelievably high. It’s higher than expected and shows that inflation is rapidly moving in the wrong direction. It really pushes the Fed even further into the wedge it’s operating in. It needs to raise rates quickly and she needs to raise rates in a big way.”

“A 75 basis point increase is most likely for this month…the big change based on this data is that we’re likely to see more 75 basis point increases, not just this month but, in the following months.”

“The impact of tighter Fed policy is hurting the stock market. The inflationary threat is real for the bond market.”

“The picture before today was that the Fed had to fight inflation by raising interest rates. We still don’t know what will happen, but it is very likely that we will have a recession because The Fed is going to have to act aggressively. A soft landing is relatively unlikely because it’s so hard to pull off. Unfortunately, we were looking for good news and this isn’t good news.”

RANDY FREDERICK, VICE PRESIDENT OF TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN, TEXAS

“If we got a weak print, we could probably get a little rally in stocks, but I didn’t think that would happen. Even if you look at the basics, but I think it’s really important to focus more on the real number, because when you talk to consumers, the two things that affect them the most are food and energy prices, so it’s hard to ignore that But gasoline prices have gone up throughout first two thirds of June and they didn’t really start to fall until after that so it seemed almost certain that we would end up with a high print but if we were to get a lower print it would have been sharp bullish for equities and the reason I say that is that it could imply that the Fed will tighten in small increments, in other words, bring that three-quarters upside at the end of the month to half or that they could stop sooner. None of these things happened.

“The probability of this rate hike was 100%, it hasn’t been this high since the last hike, it was like 85% just a week ago, so that number implied that we were going to get an impression hot, which I’m not surprised by. I think that might be the peak, if you look across the commodities space, most commodities are down and that includes energy, but it didn’t really start until the last quarter of June so it could be the peak but you can’t really call it yet, it’s too early.

DAVE GRECSEK, MANAGING DIRECTOR, INVESTMENT STRATEGY AND RESEARCH, Aspiring, NEW YORK

“The Fed sees commodity prices falling sharply. They see wages rising, but not as a higher price-wage spiral. And then the dollar is very strong. They also realize that the increases they’ve already made have a They’re going to be hesitant to raise rates more than they need to at this point, even though we’ve gotten a higher than expected inflation number right now.

“If we see a few more upside misfires to the extent that we saw today, that could matter to the Fed, but markets are going to come to terms with that today.”

“The Fed has been pretty clear and transparent in terms of conveying the expectation that they’re going to continue to raise rates quickly in the near term. So that doesn’t really change that. If we see another few more months- inflation higher than expected at the levels we see today, that could change the Fed’s course.”

“Higher-than-expected inflation will simply mean the Fed will have to keep raising policy rates, which for both stocks and bonds will continue to weigh on yields.”

STEVEN RICCHIUTO, CHIEF ECONOMIST OF THE UNITED STATES, MIZUHO SECURITIES USA LLC, NEW YORK

“It’s hot and suggests that there will be another yield curve inversion. This suggests that the start of the curve will rise further, as people are pricing in 75 basis points, and maybe moving that estimate from year-end from 3.5% to 4%, as that single point was in the June summary of economic projections.

“It’s a problem with all this data in that it gets sticky for a while and when it eventually changes it will change quite quickly. But waiting for that to change is still the problem and everyone expects that let next month be the peak, when in reality it might be further down the equation than you thought. That’s what this number is showing you.

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“The numbers were worse than expected, but the fact that the core (CPI) is showing some deceleration year-over-year gives a bit of an indication that this is the last hurrah in terms of rising inflation.”

“While the numbers are ugly and certainly warrant a 75 basis point (interest) rate hike by the Fed in July, the hints that inflation may be starting to ease are there.”

“It might even prompt the Fed to raise (interest rates) 75 basis points in September as well.”

“Most of the gains come from energy. The good news is that energy prices have started to fall and that should show in the next reading.

“The market doesn’t like it, but that’s the first reaction. I suspect that once the numbers are fully digested, we’ll see a repeat of what we’ve seen over the past few days.

Compiled by the Finance and Markets Breaking News team

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