Cheryl Casone of FOX Business reports on the June consumer price index released on Wednesday, which revealed that inflation is now at a new high of 40 years.
Inflation accelerated more than expected to a new high of four decades in June, as the price of daily necessities remains painfully high, exacerbating financial stress for millions of Americans and exacerbating a crisis. policy for President Joe Biden.
The Labor Department said on Wednesday that the consumer price index, a broad measure of the price of everyday goods, including petrol, groceries and rents, rose 9.1% in June from one year. Prices rose 1.3% in the one-month period since May. These figures were much higher than the general figure of 8.8% and the monthly gain of 1% predicted by Refinitiv economists.
Mark the faster inflation rate since December 1981.
The so-called basic prices, which exclude the most volatile measures of food and energy, rose by 5.9% over the previous year. Core prices also rose 0.7% monthly, more than in April and May, suggesting that underlying inflationary pressures remain strong and widespread.
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Price increases were wide, suggesting that inflation may not be close to its peak: energy prices rose 7.5% in June from the previous month and rose by 41, 6% over last year. Gasoline, on average, costs 59.9% more than a year ago and 11.2% more than in May. The food index, meanwhile, rose 1% in June, as consumers paid more for items such as cereals, chicken, milk and fresh vegetables.
In another worrying sign, housing costs, which account for about a third of the CPI, accelerated again in June, rising 0.6%, equaling the 18-year high set in May. On an annual basis, housing costs have risen 5.6%, the fastest since February 1991.
Rental costs also rose in June, rising 0.8% during the month, the largest monthly increase since April 1986. Rising rents are a worrying trend because higher costs for rent have risen. housing affects family budgets more directly and acutely. Another figure that measures how much landlords would pay in equivalent rent if they had not bought their home also rose 0.7% in June from the previous month.
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People buy frozen food at a store in Rosemead, California, on June 28, 2022. ((Photo by Frederic J. Brown / AFP via Getty Images) / Getty Images)
“The CPI gave another shock, and as painful as the June high is, so bad is the widening of inflation sources,” said Robert Frick, a corporate economist at the Navy Federal Credit Union. “While the rise in the CPI is led by energy and food prices, which are largely global problems, prices continue to rise for domestic goods and services, from housing to cars and clothes. “
Shares fell after the report, while bond yields rose.
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Hot inflation has created severe financial pressures for most American households, who are forced to pay for more daily necessities such as food, gas and rent. The burden is disproportionately borne by low-income Americans, whose already exhausted paychecks are severely affected by price fluctuations.
Although US workers have experienced sharp wage increases in recent months, inflation has eroded them greatly: average real-time earnings fell 1% in June from the previous month when prices are taken into account. to higher consumption, according to the Department of Labor. On an annual basis, real incomes fell 3.6% in June.
Unbridled inflation and the rapid dissolution of American purchasing power have become a major political responsibility for Biden ahead of the November midterm elections, in which Democrats are expected to lose their majorities already. very thin. Polls show that Americans see inflation as the main problem facing the country, and that many households blame Biden for rising prices.
The president has blamed higher prices on greedy corporations, bottlenecks in the supply chain and other pandemic-induced economic disruptions, as well as the Russian war in Ukraine. Most economists now agree that unprecedented levels of government stimulus and a stronger-than-expected pandemic recovery have also played at least some role in exacerbating rising prices.
In a statement after the report was released, Biden acknowledged that inflation is “unacceptably high” and described it as his “top priority”. But he suggested the data is “out of date”, arguing that record gas prices are to blame for the ugly CPI reading, noting that prices at the pump have fallen since then.
“While today’s overall reading of inflation is unacceptably high, it is also out of date,” Biden said. “Today’s data does not reflect the total impact of nearly 30 days of declines in gas prices, which have reduced the price at the pump by about 40 cents since mid-June. These savings are offering a significant margin of breathing in American families. “
The Marriner S. Eccles Federal Reserve Building in Washington, DC, USA, Wednesday, July 6, 2022. (Photographer: Al Drago / Bloomberg via Getty Images / Getty Images)
The worse-than-expected report will also have important implications for the Federal Reserve, likely solidifying a series of aggressive rate hikes as central bank officials try to control inflation. Policymakers have already raised the benchmark interest rate by 75 basis points last month for the first time since 1994 and have confirmed that a similar size increase is on the table in July.
With inflation even higher than economists expected in June, Wall Street is raising the odds of a 100 basis point increase in July. About 38% of traders are now assessing the chances of a 100 basis point increase later this month, according to the CME Group’s FedWatch tool, which tracks trading.
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Still, the Fed is in a precarious situation as it walks the line between cooling consumer demand and bringing inflation closer to its 2% target without inadvertently dragging the economy into a recession. Rising rates tend to create higher rates on consumer and business loans, which slows the economy by forcing entrepreneurs to cut spending.
“Inflation continues to rise with price increases within the core, implying that it will require strong and sustained policy action by the Federal Reserve that runs the risk of sending the economy into recession early next year said Joe Brusuelas, chief economist at RSM. “According to our estimate, there is a 45% probability of a recession over the next twelve months.”