CPI in the United States grew faster than expected in May, both month-on-month and year-on-year, at a year-on-year growth rate of 8.6%, hitting a 40-year high after March. CPI rose 1.0 per cent in May from a month earlier, of which energy prices rose 3.9 per cent and food prices rose 1.2 per cent.

What may be more shocking about the May CPI data is that Aditya Bhave, a senior US and global economist at Bank of America Corporation, points out that the report has almost no weaknesses. Brean Economics noted that inflation showed no sign of slowing, with 61 per cent of CPI components recording year-on-year growth of at least 6 per cent in May and 63 per cent of similarly high growth rates in April.

As a result, commentators argue that the May CPI report is in line with the increasingly popular view that inflation is no longer just the product of disruption in the commodity supply chain, it is also driven by strong consumer demand and strong wage inflation.

In the face of such accelerating inflation, what will the Fed do next? Apart from the 50 basis point interest rate hikes widely expected by the market in June and July, will there be any new changes?

As mentioned in an earlier article on Wall Street, the pricing of the swap market shows that there is a 50% chance that the market will raise interest rates by 50% in July.

Barclays became the first big Wall Street institution to expect the Fed to raise interest rates by 75 basis points. Some traders see a 50 per cent chance that the Fed will raise interest rates by 75 basis points in July, while Barclays expects a rate hike as soon as next week or this month.

Jonathan Millar, an economist at Barclays, said that now the Fed has every reason to raise interest rates by more than the market expected in June. The Fed may raise interest rates by 75 basis points in June or July. Instead, it is expected to do so in June. "it's not just headline inflation," Barclays analysts commented on May CPI. "if all this comes from energy, we tend to ignore it, but everything in this report is very strong and is getting stronger."

Quincy Krosby, chief equity strategist at LPL Financial, also mentioned that the Fed meeting next Tuesday through Wednesday will be particularly important, and the market wants to hear how the Fed expects to combat costs that have exceeded economists' expectations. It is clear that there will be more rate hikes in the future, but the Fed may start talking about the possibility of 75 basis points.

Bank of America Corporation's benchmark is still expected to raise interest rates by 25 basis points in September, but pointed out that the May CPI increased the risk of raising interest rates by 50 basis points in September.

Jan Hatzius, chief economist of Goldman Sachs Group, commented that the across-the-board strengthening of core CPI inflation would bring decisive changes to the Fed, allowing the Fed to continue raising interest rates by 50 basis points at a time until September. Goldman Sachs Group continues to expect terminal interest rates to rise to 3.0-3.25% in the first quarter of next year.

Ira Jersey, chief U.S. interest rate strategist at Bloomberg Industry Research, commented that the bear market in the Treasury yield curve is likely to flatten at least until next week's Fed FOMC meeting. We still don't think the Fed will seriously consider raising interest rates by 75 basis points at a time, but market pricing may reflect the possibility of raising interest rates by this magnitude. Given the strength of core CPI, the market is likely to raise interest rates by more than 50 basis points more than once after September. The Fed may try to enter a restrictive range beyond the neutral level this year and may consider suspending action towards a 4 per cent rate hike in order to make very lagging monetary policy work.

Priya Misra, head of global interest rate strategy at TD Securities, commented that markets are closer to pricing to reflect a 50 basis point rate hike in September, which would be scary for risky assets because the Fed may not slow down after making interest rates neutral.

AXS Investments's CEO Greg Bassuk believes that investors' interpretation will focus more on how long high inflation will stay with us, rather than on whether inflation has peaked. One of the big lessons we have learned over the past year is that there is a lot of uncertainty in any single data. We will look at the US PPI to be released next Tuesday, and next Wednesday, we will see retail sales data, as well as some comments from the Fed after the meeting.

Michael Darda, chief economist and market strategist at MKM Partners, said annual inflation growth may be very close to its peak, but it may have nothing to do with the Fed's path of monetary tightening or bond and stock market valuations. Because if inflation slows down on the current basis and is still growing at a very high level, that is not the environment in which the Fed is going to stop, we are seeing some kind of significant revaluation of high-cap stocks.

Seema Shah, chief global strategist at Principal Global Investors, commented that the CPI data were ugly. Although inflation will eventually fall at any time, it will be a painfully slow process. The Fed's determination to stabilize prices now faces a real test. Even if the economy is in trouble, it will need to be relentless and aggressive in raising interest rates until inflation finally begins to abate. The possibility of a Fed put option (Fed put) is already so low that it is time to leave it firmly behind.

Dennis DeBusschere, founder of 22V Research, says CPI data are poor. Given the tight supply in the labour market and the fact that core CPI has not fallen on a month-on-month basis, Fed Chairman Powell's comments should sound very hawkish after next week's FOMC meeting.

Chris Zaccarelli, chief investment officer of Independent Advisor Alliance, commented that the Fed will face more inflationary pressure, will need to raise interest rates by at least 50 basis points each at its next three meetings and by the end of the year, and will need to reassess its shrinking plan. While there is not expected to be a recession this year, there are many concerns about rising interest rates, increased volatility and reduced liquidity.