The United States’ inflation rate increased to 9.1 percent in June, the highest level since 1981 and higher than economists had anticipated.
The nation’s broad gauge of goods and services, the consumer price index, rose over the Dow Jones forecast of 8.8 percent.
Up from an 8.6 percent increase in May, it’s the largest 12-month increase in almost four decades.
After prices jumped 1 percent from April to May, prices increased another significant amount, 1.3 percent on a monthly basis, from May to June.
The continued price rises highlight the devastating effects that inflation has had on many households, with the cost of necessities rising especially quickly relative to typical salaries.
President Joe Biden’s approval ratings have plummeted as a result of the inflation’s persistent rise, and Democrats face a serious political threat in the upcoming congressional elections as a result.
Due to the fact that a disproportionate amount of their income is spent on necessities like housing, transportation, and food, lower-income and Black and Hispanic Americans have been struck particularly hard.
Some economists have held out optimism that the short-term peak in inflation may be getting closer.
Gas prices, for instance, have decreased from the eye-watering $5 per gallon reached in mid-June to an average of $4.66 nationwide as of Tuesday.
While still significantly higher than a year ago, this decrease could help to contain inflation in July and possibly August.
Additionally, transportation costs and commodity prices have started to decline, pay rises have halted, and surveys suggest that Americans’ long-term expectations for inflation have relaxed – a tendency that frequently points to more moderate price increases over time.
However, concerns about inflation and the economy are top-of-mind for Americans, as evidenced by the fact that 40% of adults—up from just 14% in December—said in a June AP-NORC poll that tackling inflation should be a top government priority this year.
The Federal Reserve’s case for another significant hike of 0.75 percentage points in its benchmark short-term interest rate, which is presently in the range of 1.5 percent to 1.75 percent, would undoubtedly be strengthened if inflation continued to rise on a monthly basis.
The Federal Reserve raised interest rates by 0.75 percentage points during its rate-setting meeting last month, the highest increase in nearly three decades.
Fed Chair Jerome Powell and other Fed officials are raising interest rates at the quickest rate since the late 1980s in a bid to curb inflation since it continues to be a problem.
Before slowing down its rate hikes, Powell has underscored that the central bank wants to see ‘compelling evidence’ that inflation is dropping.
A “series of lowering monthly inflation figures” will be required, he stated at a press conference last month.
Some economists are concerned that the Fed may raise rates too soon in an effort to control inflation, despite the fact that the economy is, on the whole, slowing down.
The cost of borrowing might push the economy into a recession next year.
Spending by consumers has begun to moderate a little, home sales are declining as mortgage rates rise, and industry output decreased in May.
The Fed prefers slower growth because it should assist to reduce inflation.
Healthy employment growth in June indicate that the economy is still growing and that there are few indications of a looming recession.
Later this year, inflation is probably going to slow down, but it’s unclear by how much.
Tuesday saw a drop in oil prices to around $96 per barrel, and other commodities, including metals like copper, have also become less expensive.
This is largely due to concerns about a recession in the U.S. and Europe.
The cost of shipping goods internationally has decreased, and the main ports in America, Long Beach and Los Angeles, are experiencing less ship delays.
According to Omair Sharif, the founder of Inflation Insights, wholesale gas prices have dropped to roughly $3.40 per gallon, which predicts that retail prices may fall as low as $4.20 by August.
Used car costs are expected to decrease in the next months as wholesale used car prices are also reducing.
But a lot of things are still getting more expensive.
As more Americans have moved out on their own as a result of consistent job growth and salary increases, apartment rents have increased.
According to real estate company Redfin, the average rent for new leases has grown by 14% over the last 12 months to $2,016 per month.
Due to the fact that they take into account all prices, including those from current leases, the government’s inflation index for rents has climbed more slowly over time.
However, economists anticipate that in the upcoming months, the government’s inflation gauge will increase due to the rising cost of new leases.
Overseas inflation has also skyrocketed.
In May, it increased to 9.1 percent in the UK, the highest level in forty years, primarily due to rising gas and food prices.
The rate of change from one year prior in the 19 European nations that utilize the euro reached 8.1 percent in that month, the highest level on records going back to 1997.