A virtually unknown part of the financial market which has proven uncannily accurate reading inflation is predicting an annual headline rate on the CPI of 8.5% or higher for the next five months, starting in May.

Fixings, or derivative-like-instruments related to the market for Treasury inflation-protected securities (TIPS), are indicating the year over year CPI reading for May will come in at 8.5% on Friday, matching a 40 year high that was hit in March. The median forecast of analysts polled by the Wall Street Journal was 8.2%. Fixings traders see the rate continuing to climb, hitting 8.6% in June, and July, and then moving up to 8.8% in August and September, before dropping to 8% in October.

Fixings are traded by anyone involved in inflation swaps, such as hedge funds, mutual funds, or money managers. Clearly their prediction sees inflation running hotter than most investors have been assuming would be the case. If it bears out, it would become much more likely the Fed would increase their monetary tightening more aggressively, as inflation began rising in the face of their present policy.

Edward Moya, a senior market analyst for the Americas at Oanda said, that if we do see this, “a much more aggressive Fed tightening schedule would begin to get priced in and we will probably see more half-point rate increases through the rest of the year. Obviously, the bond market would sell off and investors would struggle to hold on to risky assets.”

It is thought the reasoning behind the continued rise in inflation seen by fixings traders may be due to continued rises in oil and transportation, which will raise the prices of transported goods, from food to retail goods. In addition it is likely the war in Ukraine would play a continuing role as well.

Gang Hu, a TIPS trader with New York hedge fund WinShore Capital Partners said, “The fixings market is saying we are going to have fairly strong prints for the next five to six months, and then the market has no confidence that we are going to see a peak on inflation: It doesn’t know exactly when inflation is going to slow down.”