By James Langton

(April 14 – 13:00 ET) – This morning’s U.S. CPI report indicates that the annual inflation rate there is 3.7%. That the fastest it’s risen in ten years, says the analysts at CIBC World Markets.

The bearish tone in the market is reinforced by the fact that the inflation rise has been broad-based, not concentrated in one sector of the economy, says CIBC. BMO Nesbitt Burns concurs. The inflation report cannot be dismissed as oil shock related, says Nesbitt.

CIBC predicts possible further inflation risks. Recent increases in oil production by OPEC won’t match heightened summer demand, says CIBC. Further, the possibility of drought in the major grain growing areas threatens to push food prices higher.

“The Fed has thus far opted for a gradualist approach to preventing an inflationary spiral but today’s report is bound to stoke market fears of tougher medicine around the corner,” says CIBC. It shares those fears, expecting three rate tightenings this year of at least 75 basis points. Nesbitt says the report raises “the odds that the Federal Reserve may consider tapping the brakes with a firmer foot at next month’s FOMC.”