Inflation risks reminiscent of the 1970s economy for the Fed

The 10-year Treasury yield (^TYX) is peaking above 4.5% coming off of this morning's Consumer Price Index (CPI) report that saw inflation tick up 0.4% month-over-month and 3.5% annually. The Federal Reserve could have a serious case of déjà vu on its hands if inflation manages to unwind economic progress, as was the case in the 1970s.

Yahoo Finance Senior Reporter Jared Blikre gauges the momentum behind market volatility and "supercore" inflation — the prices of services that exclude housing and energy costs — as the Fed wrestles with March's economic data.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Luke Carberry Mogan.

Video Transcript

- Let's get over to Jared Blikre now for a closer look at inflation and what's going on today.

JARED BLIKRE: Thank you, Julie. Let's start with the 10 year T note yield. Just as you said, that's up about 18 basis points today. Now, where is it coming from? I think that's important too. We are coming-- We are still over a three year basis near the highs, and now, the next target now that we've exceeded 4.5%, traders are going to be looking to 4.5% in the volatility that we've seen in the bond market.

And let's take a look at the MOVE index. We have seen that leak into equities today. Here is the VIX of the VIX, and here is the VIX. I'm going to dial this down to a year so you can see. We are at 16. Now, these are not hugely elevated levels, but they are higher than average. I'll get into some sector action in a minute. But first, I want to go over some of the CPI numbers.

This is about a seven year chart of super-core CPI. That's something we were just listening to with Victoria Fernandez on-- uh, just a minute ago. Now, the year-on-year number is hotter than 5%, and the three month number has accelerated to 8%. Very close to the highs we saw only a couple of years ago. So the notion that inflation is in the rear view mirror-- not seemingly the case.

Now, here's another thing. I'm writing about this in the morning brief tomorrow morning. We have a CPI. This is 1970 all the way over here to 1985. And what we saw was we had this double peak, and what's catching traders attention is the potential that we are now retracing that. So what happens from here? Do we go up again? Do we go down? It seems that the ball is in the Fed's court here, but maybe the Feder-- Federal Reserve has lost a little bit of control, finding itself behind the eight ball.

Now, let's take a look at the sector action because only energy in the green today. That's off of that WTI print. But look at real estate, down 4.5%. Utilities down 2%. Very interest rate sensitive. A picture's worth a thousand words, you take away NVIDIA and not much green in the NASDAQ 100 here.