The Fed's game of economic whack-a-mole continues, with stubborn inflation prints popping up as another begins to fall. This higher-than-expected print has caught many off guard, despite headline inflation still continuing to cool, in line with previous months. However, this surprise will likely have ramifications for the Fed's monetary policy outlook, following such an aggressive dovish stance last month.

Consequently, the disappointing figures could prompt the Fed to reassess its rate cut timeline and consider maintaining higher rates for longer. The prospect of higher rates will strengthen the US dollar against major peers, however equity markets are likely to experience increased volatility, especially in growth sectors that are more vulnerable to interest rates. Additionally, treasury yields may rise slightly in response to the inflation data, reflecting the market's reassessment of the rate-cutting path.