US inflation rose to new highest in over four decades in June
US inflation continued to rise and hit 9.1% in twelve months through June, from 8.6% previous month and beating forecasts for 8.8% increase, while monthly figure showed consumer price rising to 1.3% in June from 1.0% in May and above 1.1% consensus.
Underlying inflation pressures remained strong in June, as so-called core inflation which excludes volatile food and energy components, rose to 0.7% m/m in June from 0.6% in May.
The largest annual increase in inflation since late 1981 was mainly driven by continuous rise of energy and food prices, but also by a massive fiscal stimulus that government pumped into the economy during Covid pandemic crisis and persisting supply shortages.
The situation worsened after the start of the war in Ukraine and subsequent Western sanctions that banned Russian oil from the market and caused shortages in supply, sparking the chain reaction in pushing the prices of gasoline to record highs in June and lifting the prices of food and other goods and services.
High inflation and tight labor market contribute to Fed’s strongly hawkish stance, with majority expecting another massive rate hike of 75 basis points, with some economists saying that 1% hike cannot be ruled out in Fed’s July 26-27 monetary policy meeting, as the central bank wants to bring inflation down to its 2% target.