U.S. Inflation Rises to 5.4% in June, the Highest Rate Since 2008

Olive Boneflayer

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According to the Bureau of Labor Statistics (BLS), consumer prices in the U.S. stood at 5.4% in June year-on-year, the highest since 2008 and 0,4% above that of May. Excluding fresh food prices and energy prices, the index gained 0.9% this month, compared to 0.7% the month previous.

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US Core Inflation Reached 4.5% YOY

These are higher than expected figures, as analysts consulted by Reuters pointed to a 0.5% gain. Core inflation reached 4.5% year-on-year, 0.7% above the previous month. Consumption is being boosted by the vaccination campaign, low-interest rates, and the government’s $6 trillion stimulus packages.

The increase in inflation last month was largely due to the increase in the prices of second-hand cars (10.5%) and gasoline (2.5%), in the context of the rising prices of cars, raw materials, and energy.

Sarah House, a senior economist for Wells Fargo’s corporate and investment bank, told CNBC: “What this shows is inflation pressures remain more acute than appreciated and are going to be with us for a longer period.”

“We are seeing areas where there’s going to be ongoing inflation pressure even after we get past some of those acute price hikes in a handful of sectors.”

Stocks Plummeted Upon Announcement

Following the news, stock market futures plummeted, albeit only slightly, with the Dow Jones and the S&P 500 falling about 0.2% each. At the same time, the 10-year sovereign bond interest rates have suffered great volatility. They rose strongly until trading at a rate of 1.41%.

US inflation has been surprised by going upward, favored by strong demand, shortages in some supplies –especially semiconductors– and difficulties in filling available job vacancies. However, bank analysts consider that this growth will stabilize in the final part of the year.

The rebound in consumer prices is revealed two weeks before the next meeting of the U.S. Federal Reserve (Fed) on monetary policy, and amid growing concern about inflation as the economy strengthens the recovery.

Fed Chairman Jerome Powell has acknowledged that there will be notable price increases, but that they will be “transitory” in nature. He has insisted that the Fed is not planning on adjusting the central bank’s interest rates, currently between 0% and 0.25% for the remainder of the year.

The US central bank last month raised its inflation forecasts to 3.4% at the end of 2021.

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