Rising cyclical pressure will keep inflation elevated

The spread of the Delta variant domestically has triggered a temporary reversal in the reopening inflation in high contact services, but its spread across other parts of the world will intensify supply shortages and drive goods prices higher. At the same time, transportation costs are soaring, energy prices are proving more resilient than we expected and cyclical inflation is still building. The upshot is that, while price inflation will fall next year, we expect it to rebound to well above 2% in 2023.