The inflation report released by the Bureau of Labor Statistics on Wednesday morning showed prices rose by 1.3% in June, up from prices a month earlier, also considered a spike, reflecting the way Americans keep stretching budgets to keep a roof over their heads, gas tanks full, and groceries purchased. Prices rose 9.1 percent in June, year-over-year, setting a new peak, and inflation remains 40 years high, driven in large part by higher energy prices.
Energy prices rose by 7.5 percent from May through June alone, accounting for almost half of month-over-month inflation. Consumer prices rose 9.1 percent compared to the same time last year, the government said Wednesday, marking the biggest 12-month rise since 1981, up from a jump of 8.6 percent in May, according to data released by the Treasury Department.
Excluding the volatile food and energy categories, the so-called headline prices rose 0.7% from May to June, the biggest such spike in the past year. From May to June, prices rose 1.3 percent, another big spike, following an increase of 1 percent in prices from April to May. The Consumer Price Index, which measures the total price of a representative basket of goods and services purchased by Americans, rose 1.3 percent last month, seasonally adjusted, and 9.1 percent year-over-year, according to data from the Bureau of Labor Statistics, which is higher than estimates in both cases.
Soaring prices of gasoline, food, and rent pushed American inflation to a new four-decade peak in June, further straining households and possibly setting up the stage for another big Fed rate increase, which would likely set up higher borrowing costs.
The continued run-up in inflation has alarmed Chairman Jerome Powell and other Federal Reserve officials, who are engaged in the fastest round of interest rate increases since the late 1980s in an effort to slow the upward spiral. Immediately after the inflation report hit the wires, US Treasury yields jumped across the board, betting that the Fed would have little choice but to forcefully increase rates over the next few months in order to calm sky-high prices throughout the economy.
Surveys showed that Americans’ expectations of inflation in the longer term had softened, a trend that typically points toward a more modest increase in prices over time. Gas prices, for instance, fell from an eye-watering $5 per gallon hit in mid-June to an average of $4.66 nationally Tuesday, still well above where they were a year ago, but a decline that may help to slow inflation in July and perhaps August.
Wholesale gas prices have fallen to around $3.40 a gallon, suggesting retail prices could drop as low as $4.20 a gallon by August, according to Omair Sharif, the founder of Inflation Insights. High inflation has already hurt Mr. Biden’s popularity, and last month’s spike in gasoline prices, with a national average above $5 a gallon, has made more people even gloomier about the economy.
Forty percent of adults said in the AP-NORC poll taken in June that tackling inflation should be the government’s top priority this year, compared with only 14 percent who said that in December. Economists expect rising costs of new rents to push up government inflation indexes in the coming months.