Inflation Surprised On The Upside

Inflation beat expectations and higher prices were seen across the board. As we expected inflation has been a non-factor in the 1st half of 2014, but will increase moderately in the second half. We expect the Fed to be reactive, instead of pre-emptive, when it comes to inflation, which means the Fed’s tone will remain dovish until inflation becomes a real concern. Inflation at producers’ level seems to be trending moderately higher too.