Financial markets could see a three-month run of 8.8% inflation readings from next week, which adds up to “bad news”.

The financial markets’ most knowledgeable inflation traders are expecting a range of around 8.8% annually in US consumer prices over the next three months, beginning with the release of July data on August 10th.

While such readings are below June’s 9.1% reading and could support the theory that inflation may have reached a high in almost 41 years, inflation derivatives traders’ expectations still add up to a lot of bad news for the global economy broader market . The reason boils down to the persistence of high US inflation, which would shatter hopes of investors, traders and policymakers for a relatively quick and significant slowdown in gains.

Read: Trading in “peak inflation” fuels financial markets as investors brace for US economic slowdown

The sequence of numbers of 8.8% is divided into 8.78% for July, 8.75% for August and 8.79% for September. It already takes into account the recent fall in gas prices – along with a fall in commodities such as wheat W00, -3.28% – and would come while the Federal Reserve is in the midst of an aggressive hike-rate campaign. Hopes that inflation may have peaked in June may mask the risk that a wage-price spiral could still be developing and that price increases in other areas, such as housing, could accelerate or remain sticky , some say.

“It’s bad news that inflation has persisted for so long,” said Derek Tang, an economist at Washington-based Monetary Policy Analytics. “The longer high inflation persists, the more worried Fed officials are that inflation expectations are getting off the rails, and they cannot allow that to happen.”

While much still depends on jobs data and whether a wage-price spiral unfolds, “people will be pricing in a higher policy rate for year-end and rate hikes that last longer into 2023, with no first rate cut until later,” Tang said by phone on Tuesday. Three annual headline CPI prints of essentially 9% “make it hard to see how the Fed will start cutting rates in 2023. Gradually falling inflation is good, but the question is, ‘Will it come back soon enough?’ The Fed has a window to prove that it will lower inflation and people will start to lose faith in this story.”

For now, financial markets seem to be largely accepted that the central bank will more or less get inflation under control in the longer term: 5-, 10- and 30-year breakeven rates remain in a range from 2.2% to 2.7% , while yields on inflation-linked government bonds fell below multi-year highs but are moving higher on Tuesday, according to Tradeweb data. Additionally, all three major US stock indexes DJIA, -0.72% SPX, -0.13% COMP, +0.30% are below the lows they hit in June when inflation fears dominated.

After a bounce in growth and technology-related stocks in July, how recession risks will weigh on the recent bear market rally? Franklin Templeton Investment Solutions’ Ed Perks said in a phone interview late last week that the market may be looking through “rose-colored glasses,” adding, “We’ve got some pretty tough sleigh rides ahead of us.”

On Tuesday, major stock indices were lower in afternoon trade as investors also factored in geopolitical risks between the US and China. Meanwhile, government bond yields were generally higher as investors sold government bonds, reversing prices from earlier in the day.

“If we get a labor/price shock, stocks could be hit very hard,” Monetary Policy Analytics’ Tang told MarketWatch. Rising labor costs on the way into the downturn “will hurt revenue and could be a problem for profit margins.”

“The bigger problem is that the market may misunderstand how serious the Fed is about inflation,” he said. “It may be wishful thinking that the Fed can bring it back down to 2%.”

On Tuesday, two senior Fed officials said the central bank needs to hike interest rates much higher and likely keep them high for a while to stem the worst burst of inflation in nearly 41 years.

Read: Fed officials say US interest rates will continue to rise until high inflation eases