It is the highest level in more than 40 years and higher than the previous reading, when prices rose 8.6% for the year ending May. It is also well above the 8.8% that economists had predicted, according to Refinitiv.
The June consumer price index also showed that global prices paid by consumers for a variety of goods and services rose 1.3% from May to June.
Much of the June rise was driven by a jump in gasoline prices, which rose nearly 60% during the year. Americans faced record gasoline prices last month, with the national average exceeding $ 5 per gallon nationwide. Electricity and natural gas prices also rose, 13.7% and 38.4%, respectively, for the 12-month period ended June. Overall, energy prices rose 41.6% year-on-year.
The increases, however, were noticed in all categories. Home food prices rose 12.2% during the year, with eggs 33.1%, butter 21.3%, milk 16.4%, chicken 18.6% and coffee 15.8%. Housing costs rose 5.6%.
Tackling inflation is “a top priority”
President Joe Biden said Wednesday that the June CPI inflation reading was “unacceptably high,” but noted that “it is also out of date,” as gas prices have fallen in the past 30 days. Gasoline and crude oil prices are now below $ 100 a barrel, below June highs.
“Energy alone accounted for almost half of the monthly rise in inflation,” 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 giving a significant margin of breathing down on American families. And, other commodities like wheat have fallen sharply since this report. “
Biden also reiterated that tackling inflation is his “top priority.”
The typical American household now needs to spend an additional $ 493 a month to buy the same goods and services they did at that time last year, said Mark Zandi, chief economist at Moody’s Analytics.
And as prices continue to rise, they are also outpacing wage gains.
Real hourly earnings, which represent 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 eroded virtually most of the gains,” said Kathy Jones, chief executive officer and chief fixed income strategist at Charles Schwab. “People’s purchasing power is going down.”
How this can affect rate hikes
Excluding food and energy costs, which tend to represent transitional fluctuations, the prices of the underlying CPI rose by 0.7% from May to June and by 5.9% during the 12-month period ending in June. .
The Federal Reserve pays special attention to these basic data when assessing future inflationary trends, and the latest figures are likely to give the central bank the green light to continue its aggressive series of rate hikes to cool the economy and bring down higher prices. The Fed is expected to raise its benchmark interest rate by at least 75 basis points at its next monetary policy meeting July 26-27.
While it is too early to say whether inflation has peaked (especially given the broader volatility of the global economy), it appears that core inflation has stabilized and expectations are that it will continue to fall in comparison. year-on-year, he said. Cailin Birch, global economist at the Economist Intelligence Unit.
“What worries everyone is today’s inflation data or what happened yesterday, so [the Fed is] having to work with retrospective information to make forward-looking decisions, “he said.” I think they will decide to focus on keeping inflation expectations anchored, reassuring the market. And that means interest rates are rising, but it carries more risks of recession to move forward. “
CNN’s Allie Malloy contributed to this report.