As many agricultural commodities went vertical recently – that’s not mentioning Lumbar which shot from 250 USD to 1400 USD in 9 months - market participants are getting ready for roaring inflation. 

The Bloomberg agricultural index is up more than 50% since June 2020 and is still moving vertically. 

Due to the lag between agricultural costs and finished food prices, the latter is about to rise sharply. 

Since food is a large component of Consumer Price Index (CPI) baskets in many countries, Bloomberg warns that "this large inflationary impulse in the Asian region that houses more than half the world’s population should result in higher wage costs in the factory base of the world. As CPI and PPI (Producer Price Index) rise in Asia, it will feed through globally in the months ahead."

According to the latest ISM survey, the manufacturing prices paid (also known as the inflation subindex) remain at all-time highs near 86.0. There is a huge price pressure for manufacturers, which will eventually lead to higher prices for consumers. 

This week's Federal Reserve (Fed) decision is not expected to bring any significant news. The Fed's fund rate will and Quantitative Easing (QE) volume will remain unchanged. However, the Fed's statement regarding inflation will be critical.

If the central bank admits inflation is running hot, it might lead to a quicker tightening of monetary policy. That should be bearish for stocks and precious metals and bullish for the USD. 

On the other hand, should the Fed continue its "inflation is only transitory" theme, markets could continue rallying as it would imply the central bank is in no rush to tighten monetary policy.