Focus on outlook for rate hikes as US inflation at 7% is highest for 39 years

The US posted its largest jump in consumer prices in 39 years of 7%.

All eyes are now falling on central banks around the world as the US posted its largest jump in consumer prices in 39 years of 7%, should it lead to more pressure for interest rate hikes.

However, government bond yields and stock markets on both sides of the Atlantic were little changed in part because US government yields have already surged since the start of the year. Traders have braced for the US Federal Reserve to begin hiking rates and wrapping up the bond purchases that have flooded markets with cash for nearly two years. 

"The mere fact that US CPI was in line with expectations seems to have been enough to prompt further gains in stocks," said chief market analyst Chris Beauchamp at online broker IG.

Amid energy price hikes and supply chain difficulties, inflation has been a growing concern across the world should central banks including the ECB be prompted to raise interest rates to tame it.                    

Hyperinflation

Europe will get stung this year with the biggest energy bill in a decade as hyperinflation in natural gas and power prices hits homes and factories across the continent, according to Citigroup. 

Using current forward prices, the region’s total primary energy bill will come in at about $1trn (€880bn), the bank said. 

That compares with about $300bn last year and $500bn in 2019. 

“It is gas and electricity that is becoming prohibitively expensive in Europe,” Citigroup analysts including Alastair Syme wrote. 

“Consumers and industry across the region are likely going to have to make some tough choices about their energy consumption,” Mr Syme said. 

• Bloomberg and Irish Examiner