A new peak since the 80s, and this time it is already close to double digits. Data from the Consumer Price Index (CPI), the main tool for measuring inflation, shows a 9.1% increase in June from the previous year, the fastest annual pace since 1981. On a monthly basis, prices are up 1.3% and monthly core inflation, discounting more energy and food prices volatile, 0.7%. The rise was driven by the rise in gasoline prices, the rise in rents and the sharp rise in groceries prices.
The data exceeded the expectations of experts, who pointed to a rise of 8.8% and 1.1%, respectively. On Wednesday, White House spokeswoman Karen-Jean-Pierre explained that even the White House has recovered, warning that “the very high rate of inflation will be recorded in June because of the price of gasoline.” In May, the rise was 8.6% and 1%, respectively. For the Joe Biden administration, inflation at an all-time high is the worst possible asset for the November midterm elections.
The increase was across the board, with the gasoline, housing and food indices being the biggest contributors. The energy index rose 7.5% during the month and contributed about half of the increase, with the price of gasoline up 11.2%. As for food, according to data released this Wednesday by the US Census Bureau, it rose 1% in June.
The rapid tightening of monetary policy in the US to contain price pressure is fueling growth concerns and making markets nervous. The latest inflation data is encouraging the Fed to raise interest rates again, with a possible three-quarter percentage point increase at its next meeting later this month, expectations that were corrected and raised by Nomura, who forecast a possible hike in light of the new record . 100 base points.
Initial signs of relief used by economists ahead of the June CPI release pointed to the modest but persistent decline in gas prices. This is too recent a low to actually reverse last month, but according to experts, it could help reverse the uptrend. From Israel, where he began Wednesday an official visit that will also take him to Saudi Arabia, President Biden defended his economic policies and stressed that the 9.1% figure was “obsolete” due to the recent drop in gas prices.
Almost all analysts considered this to be the last historical peak of inflation, since consumption trends for all other commodities, apart from energy and food prices, are beginning to moderate. Target, like other major retailers, recently said it was having trouble liquidating its inventory, showing an initial restraint in spending by the US consumer. Rest, however, seems slow.
The International Monetary Fund lowered its forecast for US economic growth and warned that a general increase in inflation posed “systemic risks” to both the country and the global economy. However, employment data in June, more positive than expected, allayed recession fears and encouraged the Fed to raise rates further.