So much for the “slowdown” narrative.

You might’ve assumed the second-largest bank failure in US history and the turmoil associated with two weeks of fairly acute financial sector angst would manifest in more subdued economic activity. And maybe they have. But not according to flash PMIs released by S&P Global on Friday.

Both the services and manufacturing gauges beat estimates, suggesting activity turned up in early April. At 53.7, the services gauge was the highest in a year, and topped every estimate from 15 economists who ventured a guess.

Notably, the manufacturing index moved back into expansion territory. At 50.4, it’s the highest since October.

“Output rose at the sharpest pace for almost a year, as stronger demand conditions, improving supply and a steeper uptick in new orders supported the expansion,” the color accompanying the release said. “Solid growth in activity was seen across both the manufacturing and service sectors.”

Markets don’t generally get too excited (or bent of shape, whichever the case may be) about the S&P PMIs, or not in the US context. In America, it’s obviously all about ISM.

That said, I do want to emphasize that on the manufacturing side, the input price gauge rose to the highest since November and on the services side, the prices charged measure rose to 58.8, the highest since August. “Output prices rose at the fastest pace for seven months,” the survey said. “Firms stated that more accommodative demand conditions allowed them to continue passing through higher interest rates, staff wages, utility bills and material costs to clients.”

Folks, I’m sorry, but this just isn’t working. The Fed needs to keep hiking rates until there’s a recession if they truly are committed to the inflation fight. If they’re not, that may be ok. After all, the “glorious” era of disinflation didn’t exactly work out well for Main Street, so maybe hot nominal growth is better. I’ve explored that over and over again, and part of me believes it.

But assuming officials are committed to bringing down inflation, they have to create the conditions whereby firms and, yes, people, can’t afford sundry “stuff.” At that point, firms will either stop raising prices, or they’ll stop selling products and services. Because that’s not really a choice, they’ll stop raising prices.

Yes, policy acts on a lag. But no, policymakers can’t wait around forever. Eventually, consumer psychology will shift, and at that point (the point beyond which expectations begin to unanchor) it’s too late. So, if the economy doesn’t respond after some reasonable adjustment period, policymakers need to slam the brakes on to make a point.

Notwithstanding monthly twists and turns in the spending figures, there’s an underlying demand impulse in the US economy that needs to be stamped out, again assuming Jerome Powell isn’t bluffing on inflation.

There’s too much latent demand just waiting to pounce at the first opportunity, whether it’s 15% off a vacation rental, 25bps off the 30-year fixed or just Bloody Marys and BLTs on the way to an afternoon shopping trip because it happens to be sunny outside. The Fed has to quell that impulse, or if not, they have to admit that 2% core inflation isn’t really their goal anymore.

Writing Friday, S&P Global’s Chris Williamson said that,

The upturn in demand has also been accompanied by a rekindling of price pressures. Average prices charged for goods and services rose in April at the sharpest rate since September of last year, the rate of inflation having now accelerated for three successive months. This increase helps explain why core inflation has proven stubbornly elevated at 5.6% and points to a possible upturn — or at least some stickiness — in consumer price inflation.

There’s really nothing else to add.