Welcome back from the Easter holiday - and to a new form of inflation.

No, not US corn at $8 a bushel, and rising. No, not US natural gas above $8 too, the highest since 2008, and rising. No, not fears of global rice prices also rising, one of the last food staples not to have soared so far, and potentially bringing global food (and geopolitical) insecurity to a whole new level. Neither am I talking about "unified and militant" Californian grocery workers' getting 19-31% pay raises in a new contract – although it is significant alongside increased US union activity, from a very low base.

I am instead referring to the fact that 75bp Fed hikes are now the new 50bp: so says the St Louis Fed's Bullard, who won't rule out taking that kind of step as he targets getting Fed Funds to 3.5% by the end of this year. The last time we saw a 75bp Fed hike was November 1994 - the final blow in the Great Bond Massacre and the trigger for the Mexican Peso Crisis, which snowballed to the Asian Crisis of 1997-98 and the Russian Crisis of 1998. Before that, a 75bp hike was seen in February 1989 - and in October 1989 we got a stock market crash and a recession in 1990. Before that, we are in Volcker land (with a slew of 75bp hikes from January 1981 to July 1984) – and that changed the face of the US and world economy. And before that it was the 1970s. That is your base of comparison.

So, bond yields are high -- US 2-year Treasuries are currently little changed at 2.45% but 10-years are at 2.85% -- and the curve is steepening again, with 2s-10s back at 40bp. Yet if the Fed takes this as a signal that all is well, recession-wise -- and Bullard also said any recession talk is premature(!)-- then prepare for serious pain ahead.

For example, in FX, USD/JPY was at 127.1 at time of writing when it started the year at 115.1. That's a 10.5% shift, and over the past 12 months it's 17.6%. This is not a small FX cross we are talking about! Historically, when JPY slumps, KRW slumps too: the latter is down 3.7% in 2022, and 10.5% over 12 months – with more to come(?) Eyes then turn to CNY – after all, CNY/JPY has shifted 19.9% over the past year. For now, China is running enormous trade surpluses regardless due to booming exports, which is about to subsidise further, and slumping imports. However, the tail risks for just how far CNY would drop if that trade position shifted, either due to global downturn or geopolitics, is worth considering by all the people who don't seem to consider anything else when it comes to China "because China".