You consumer prices in the United States rose to highest level in 13 years in June amid supply constraints and a continued recovery in travel-related service costs as the economic recovery gained momentum.
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The consumer price index rose 0.9% last month, the biggest gain since June 2008, after rising 0.6% in May, the Labor Department said on Tuesday.
In the 12-month period through June, the index increased by 5.4%. This was the biggest increase since August 2008 and followed a 5.0% increase in the 12 months to May. Excluding the volatile components of food and energy, the consumer price index increased by 0.9%, after rising 0.7% in May.
The so-called core index rose 4.5% from a year earlier, the biggest increase since November 1991, after rising 3.8% in May. Annual inflation rates were boosted by falling from last year’s weak readings of the index calculation. These base-of-comparison effects are stabilizing.
Economists consulted by Reuters had predicted a 0.5% increase in the general consumer price index and a 0.4% increase in the index’s core.
Covid-19 vaccinations, low interest rates and nearly $6 trillion in government aid since the US pandemic began in March 2020 are fueling demand, straining the supply chain and pushing up prices in the economy.
The global shortage of semiconductors has hurt vehicle production, pushing up the prices of used cars and trucks – the main driver of inflation in recent months.
While inflation has likely peaked, it is expected to remain high through part of 2022 as prices for many travel-related services are still below pre-pandemic levels.
“The pace of the economic recovery could slow down a bit in the coming months and inflation could ease from very high levels recently,” said David Kelly, chief global strategist at JPMorgan Funds in New York. “However, the economy still looks set to achieve a very full recovery in the coming months, with enough excess demand to sustain stronger inflation.”
Federal Reserve chairman Jerome Powell has repeatedly stated that higher inflation will be transitory, noting that he expects supply chains to normalize and adapt. Treasury Secretary Janet Yellen also shares that view.
The minutes of the US central bank’s June 15-16 monetary policy meeting, published last week, showed that “a substantial majority” of authorities see inflation risks as “tipped up”, and the Fed as a whole. he feels he needs to be prepared to act if these risks materialize.