The CPI basket, which measures the level of inflation in the US economy, came in at 6.8% today. We haven't seen inflation at these levels since 1982.

Next week, these elevated levels will be the backdrop for a much anticipated federal reserve meeting. The expectation is that the Fed will accelerate tapering, effectively reducing monetary stimulus. In addition, if inflation continues to trend upward, we may also see the Fed increase short-term interest rates earlier than expected, possibly in the first half of 2022.

To understand the potential impact and duration of elevated inflation, we examine three significant components of CPI, including energy, used automobiles, and shelter. Some may be more persistent than others in the coming year.

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