Inflation in the United States has suddenly accelerated to a 40-year high of 8.6%. Inflation in the United States unexpectedly accelerated in May, putting pressure on the Federal Reserve to extend its aggressive string of interest-rate hikes and adding to the White House’s and Democrats’ political woes.
The closely watched inflation indicator increased by 1% from a month ago, beating all expectations. The most significant contributors were shelter, food, and gas.
The core CPI, which excludes the more volatile food and energy components, climbed 0.6 per cent from the previous month and 6% from a year ago, both exceeding expectations.
Inflation is expected to remain high in the next months as a result of record fuel costs and geopolitical circumstances, implying that the Fed will have to keep the economy on the brakes for longer.
Following the release of the data, Treasury yields surged, stock futures plummeted, and the currency strengthened. Prices for essentials continued to soar at double-digit rates in May. Energy prices rose 34.6 per cent from a year ago, the biggest since 2005, with gasoline prices roughly 49 per cent higher.
Gas prices have risen to new highs so far in June, indicating additional upward pressure in upcoming CPI figures and keeping the Fed on the defensive.
Grocery prices jumped by 11.9 per cent annually, the highest level since 1979, while electricity costs increased by 12 per cent, the highest level since August 2006. The increase in primary dwelling rent was the highest since 1987, at 5.2 per cent.
While the job market continues to be a bright area, Americans’ confidence is being harmed by decades of high inflation, which is lagging wage growth.
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