June 20, 2024

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US inflation hit a 40-year high in June, driven by record gas prices

US inflation hit a 40-year high in June, driven by record gas prices

This is the highest level in more than 40 years and Up from the previous reading, when prices were up 8.6% from the year to May. It is also Much higher than the 8.8% economists had expected, according to Refinitiv.

The June CPI also showed that overall prices paid by consumers for a variety of goods and services rose 1.3% from May to June.

Most of the increase in June was driven by a jump in gasoline prices, which are up about 60% over the year. face the americans Standard gas prices Last month, the national average crossed $5 a gallon nationwide. Electricity and natural gas prices also increased by 13.7% and 38.4%, respectively, for the 12-month period ending in June. Overall, energy prices are up 41.6% year over year.

However, increases were felt in all groups. Household food prices are up 12.2% over the year, with eggs up 33.1%, butter up 21.3%, milk up 16.4%, chicken up 18.6%, and coffee up 15.8%. Shelter costs rose 5.6%.

Tackling inflation a ‘top priority’

President Joe Biden said on Wednesday that the CPI inflation reading for June was “unacceptably high” but noted that it is “stale as well,” as gas prices have fallen in the past 30 days. Gasoline and crude oil prices are now below $100 a barrel, down from their June highs.

“Energy alone accounted for nearly half of the monthly increase in inflation,” Biden said. “Today’s data does not reflect the full impact of nearly 30 days of declines in gas prices, which have lowered the price at the pump by about 40 cents since mid-June. These savings provide important breathing room for American households. Prices of commodities such as wheat have fallen sharply since this report. “.

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Biden also reiterated that tackling inflation is his “top priority.”

Mark Zandi, chief economist at Moody’s Analytics, said the typical American household now needs to spend an extra $493 per month to buy the same goods and services they did at this time last year.

And as prices continue to rise, they also outpace wage gains.

Real average hourly earnings — which accounts for inflation-adjusted wage growth — fell 1% from May to June and fell 3.6% from June 2021, according to separate BLS data released on Wednesday.

“Inflation has largely eroded most of the gains,” said Kathy Jones, managing director and chief fixed income analyst at Charles. Schaub. “People’s purchasing power is declining.”

How could this affect the price hike

Excluding food and energy costs, which tend to represent temporary fluctuations, core CPI prices rose 0.7% from May to June and by 5.9% for the 12-month period ending in June.

The Federal Reserve pays special attention to those fundamental data when assessing future inflationary trends, and the latest figures are likely to give the central bank the green light. to continue its violent series of interest rate hikes to cool the economy and bring down high prices. The Federal Reserve is widely expected to raise the benchmark interest rate by at least 75 basis points at its next monetary policy-setting meeting on July 26-27.

While it is too early to say whether inflation has peaked (especially given the broader volatility in the global economy), core inflation appears to have leveled off, and is expected to continue declining in comparison year on year. Kaelen Birch is a global economist at the Economist Intelligence Unit.

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What everyone worries about is the inflation data for today or what happened yesterday, as well [the Fed is] She said having to work with lagging information in order to make forward-looking decisions. I think they will decide to focus on keeping inflation expectations steady, which reassures the market. That means higher interest rates, but it brings more recession risk going forward.”

CNN’s Ally Malloy contributed to this report.