Inflation remained painfully high in June, with the consumer price index rising 9.1% year-on-year, the fastest pace since 1981. The Federal Reserve System seeks to curb sharp rises in prices.
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The 9.1% increase was mainly due to the sharp rise in gas prices in June. This means that some mitigation may be seen in July. Gas prices have fallen this month. Still, I’m worried about the other details of the report.
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The Core Index, which removes volatile food and fuel prices to capture potential inflation trends, rose 5.9% faster than expected and unexpectedly rose on a monthly basis.
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The increase was widespread. Food is much more expensive. Rent has risen the most since 1986. The set of services is becoming more expensive.
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At the same time, there is a hint that the price of the item may have been relaxed. Sporting goods were a little cheap. TV prices have fallen and are continuing.
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Julia Coronado, founder of MacroPolicy Perspectives, said: “As far as the Fed is concerned, as far as US consumers are concerned, I don’t think there’s anything good about this report.”
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The Federal Reserve is expected to raise interest rates by 0.75 percentage points later this month, but investors are increasingly expecting an even bigger 1 percent point move following the report, based on market prices.
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For American shoppers, this report confirms that the economy is extremely difficult to navigate. Rising wages are not keeping up with prices, and the cost of daily necessities is rising rapidly. Food prices rose 10.4% in the year to June, the largest annual rise since 1981.
