This is the highest level in more than 40 years That was higher than the previous reading, when prices rose 8.6% for the year ended May. That too That’s much higher than the 8.8% economists had predicted, according to Refinitiv.
The Consumer Price Index for June showed that overall prices paid by consumers for various goods and services rose 1.3% from May to June.
However, the increase was felt in all categories. Home food prices rose 12.2% over the year, with eggs up 33.1%, butter up 21.3%, milk up 16.4%, poultry up 18.6% and coffee up 15.8%. Accommodation costs increased by 5.6%.
Tackling inflation ‘top priority’
“Energy accounted for almost half of the monthly increase in inflation,” Biden said. “Today’s data does not reflect the full impact of nearly 30 days of lower gas prices, which have reduced pump prices by about 40 cents since mid-June. Those savings provide important breathing room for American households. Also, other commodities, such as wheat, have fallen sharply since the report.”
Biden also reiterated that tackling inflation is his “top priority.”
The typical American household now has to spend $493 a month to buy the same goods and services they did this time last year, said Mark Jandy, chief economist at Moody’s Analytics.
And, as prices continue to rise, they outpace wage gains.
According to separate BLS data released Wednesday, real average hourly earnings — which measure wage growth adjusted for inflation — fell 1% from May to June and fell 3.6% from June 2021.
“Inflation wiped out most of the gains,” said Kathy Jones, managing director and chief fixed income strategist at Charles. Schwab. “People’s purchasing power is declining.”
How could this affect rate hikes?
Stripping out food and energy costs, which represent intermediate fluctuations, core CPI prices rose 0.7% from May to June and 5.9% for the 12-month period ending in June.
The Federal Reserve pays particular attention to that key data when assessing future inflation trends, and the latest numbers could give the central bank a green light. It needs to continue its aggressive series of rate hikes to cool the economy and reduce high prices. The central bank is widely expected to raise its benchmark interest rate by at least 75 basis points at its next monetary policy meeting on July 26-27.
While it is too early to say whether inflation has peaked (especially given the broader volatility in the global economy), core inflation appears to have leveled off and expectations are that it will continue to decline on a year-over-year basis. Kaylin Birch is global economist at the Economist Intelligence Unit.
‘Everyone is worried about today’s inflation data or what happened yesterday [the Fed is] We have to work with backward-looking information to make forward-looking decisions,” he said. “I think they will decide to focus on anchoring inflation expectations and reassuring the market. That means more interest rate hikes, but it also raises more recessionary risks going forward.”
CNN’s Allie Malloy contributed to this report.
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