U.S. consumer inflation hits highest annual rate since 1981 – Reuters

  • The consumer price index jumped 1.3% in June
  • Year-over-year CPI climbs 9.1%, biggest rise since 1981
  • Core CPI increases by 0.7%; up 5.9% year on year

REUTERS: U.S. consumer prices jumped 9.1% in June, the largest annual increase in more than four decades amid stubbornly high costs for gas, food and rent, making the case support for another 75 basis point interest rate hike by the Federal Reserve this month .

The larger-than-expected increase in the year-over-year consumer price index reported by the Labor Department yesterday also reflects higher prices for health care, motor vehicles, clothing as well as than household furniture. The CPI has risen the most in almost 17 years on a monthly basis.

Inflation data tracked stronger-than-expected job growth in June and suggested that the Fed’s aggressive monetary policy stance had so far made little progress in cooling domestic demand and bringing the economy back. inflation to its target of 2%.

Although a global problem, high inflation is a political risk for US President Joe Biden and his Democratic Party ahead of congressional elections in November.

“Despite the Fed’s best intentions, the economy appears to be heading for a higher inflation regime,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The Fed is even further behind the curve after today’s sizzling report.”

The consumer price index rose 1.3% last month, the biggest monthly increase since September 2005, after rising 1.0% in May. A 7.5% rise in energy prices accounted for almost half of the increase in the CPI. Gasoline prices jumped 11.2% after rebounding 4.1% in May.

Natural gas prices rose 8.2%, the most since October 2005, while the cost of electricity rose 1.7%. Food prices rose 1.0%. The cost of food eaten at home rose 1.0%, posting the sixth consecutive monthly increase of at least 1.0%.

In the 12 months to June, the CPI jumped 9.1%. It was the biggest gain since November 1981 and followed an 8.6% rise in May. Economists polled by Reuters had forecast the CPI to rise 1.1% and accelerate 8.8% year-on-year. Consumer prices are rising, driven by tangled global supply chains and massive fiscal stimulus from governments at the start of the COVID-19 pandemic.

The ongoing war in Ukraine, which has caused a spike in global food and fuel prices, has aggravated the situation.
The Bank of Canada yesterday announced a one-percentage-point hike in its key rate, a major hike last seen in 1998.

Gasoline prices in the United States hit record highs in June, averaging topping US$5 a gallon, according to data from motorist advocacy group AAA. They have since declined from last month’s high and averaged US$4.631 a gallon yesterday, which may ease some of the pressure on consumers.

US stocks opened lower. The dollar appreciated against a basket of currencies. US Treasury prices fell.

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