Inflation Rose 9.1% In June, Even More Than Expected, As Price Pressures Intensify

• U.S. consumer prices accelerated in June as gasoline and food costs remained elevated, resulting in the largest annual increase in inflation in 40-1/2 years and cementing the case for the Federal Reserve to hike interest rates by 75 basis points later this month.
• The consumer price index rose 9.1% from a year earlier in a broad-based advance, the largest gain since the end of 1981, Labour Department data showed on July 13. The widely followed inflation gauge increased 1.3% from a month earlier, the most since 2005, reflecting higher gasoline, shelter and food costs.
• Economists projected a 1.1% rise from May and an 8.8% year-over-year increase, based on the Bloomberg survey medians. This was the fourth-straight month that the headline annual figure topped estimates.
• The so-called core CPI, which strips out the more volatile food and energy components, advanced 0.7% from the prior month and 5.9% from a year ago, above forecasts. Treasury yields and the dollar jumped, while US stock futures fell following the report.
• The red-hot inflation figures reaffirm that price pressures are rampant and widespread throughout the economy and continue to sap purchasing power and confidence. That will keep Fed officials on an aggressive policy course to rein in demand by hiking interest rates by additional 75 basis points, and adds pressure to President Joe Biden and congressional Democrats whose support has slumped ahead of midterm elections.
• While many economists have suggested this data will be the peak in the current inflationary cycle, several factors such as housing stand to keep price pressures elevated for longer. Geopolitical risks including COVID lockdowns in China and Russia’s war in Ukraine also pose risks to supply chains and the inflation outlook.

(Source: Bloomberg)