CPI Report Shows Accelerating Inflation But Some Signs of Cooling; Fed Likely to Maintain Hawkish Stance

All Items CPI surprised to the upside, accelerating relative to last month. Core CPI was slightly higher than expected, accelerating slightly.

Housing components were the main driver of core CPI acceleration. However, housing inflation is lagging and expected to decelerate going forward.

Core services ex housing remain hot, worrying the Fed. Volatile items like used cars dragged core CPI down, possibly masking underlying inflation.

Good news was broad disinflation in core goods. But the Fed remains concerned about rising energy prices potentially triggering more inflation.

Overall the report was mixed. The Fed will likely maintain hawkish policy as CPI doesn't enable preemptive easing amid economic risks. Stocks and bonds reacted slightly negative.