There's no escape from inflation as a perfect storm of the 'Godzilla' El Niño, AI boom, Trump tariffs, fuel crunch, and Ukraine war keep prices high | Fortune

TL;DR

• 1

  'Godzilla' El Niño threatens soft commodity prices: The expected super El Niño could disrupt crops like coffee and cocoa, which saw their largest price increases during the previous 2023-2024 event, according to Capital Economics.

• 2

  AI boom is driving chip shortages and Fed concern: Hyperscalers' hundreds of billions in spending has caused memory chip supply crunches, forcing Apple to hike device prices and even consider buying from a blacklisted Chinese producer; New York Fed President John Williams warned the Fed would hike rates if AI creates sustained demand relative to supply.

• 3

  Tariff pass-through is far from over: A New York Fed survey found 47% of service firms and 44% of manufacturers that paid tariffs directly still have more price increases to pass on, with research showing tariff effects build gradually over a year or more.

• 4

  War-related fuel and grain shocks persist: Ukraine's drone attacks on Russian refineries led to a diesel export ban and an 11% spike in futures, while Russian motorists wait up to 18 hours for fuel; wheat prices jumped 4.8% and European grain benchmarks rose 5.7% amid Black Sea shipping disruptions.

• 5

  Markets see 85% odds of a Fed rate hike by year-end: After five years of inflation above the 2% target, investors expect at least one rate hike, with nearly 50% chance of two or more, as the perfect storm of factors keeps pressure on prices.