US consumers continue to be weighed down by rising levels of inflation as the Consumer Price Index remains at an all-time high clip of 8.6% – the highest since 1981 – along with rising oil prices, as well as rising food, rent and health costs. Thanks for the cost. Meditation.
The 8.6% year-over-year figure is higher than the 8.3% that was predicted by analysts.
Dow Jones experts expected the consumer price index to rise 0.7% – a 0.3% increase over April. Instead, according to the US Bureau of Labor Statistics, it rose 1%.
Analysts expected the US to have reached “high inflation” and that the CPI would begin to show signs of cooling.
But as long as the oil price continues to climb, the CPI is unlikely to soften.
“It has changed our view over the past few weeks,” Sarah House, a senior economist at Wells Fargo, told CNBC.
“We have seen gasoline hit record levels. And naturally what stops the peak from happening behind us is energy coming out of the sector.”
The US national average for a gallon of fuel is fast approaching the $5 benchmark—which would be a record.
As of Friday, the national average was $4.98, according to AAA. Motorists in nineteen states in the union are now paying at least $5 per gallon of gas.
Biden administration officials said they have limited means to lower the price of gas, which is emerging as a major political issue in this fall’s midterm election.
The Republican Party is expected to take back a majority in the House and possibly the Senate.
Treasury Secretary Janet Yellen said on Thursday she did not expect the US economy to head into recession, but that growth would slow “absolutely” and gasoline prices were unlikely to fall anytime soon.
“I don’t think we are going through a recession. Consumer spending is very strong. The investment spend is solid,” she told The New York Times at the Dealbook event.
“I know people are very upset and right about inflation, but there is nothing that suggests that … the recession is working.”
Commerce Secretary Gina Raimondo acknowledged on Tuesday that the Biden administration is running out of options as it scrambles to reduce gas prices that have hit record highs nationwide in recent weeks.
“Unfortunately, this is the brutal reality,” Raimondo told CNN.
The stark admission echoed similar comments from President Biden, who has faced mounting pressure to respond to the gas crisis.
Raimondo echoed Biden’s persistent claim that Russian President Vladimir Putin and his brutal invasion of Ukraine are most likely to be responsible for the rise in gas prices. Biden has referred to the increase as “a rise in Putin’s prices.”
“This is due, in large part, to Putin’s aggression,” Raimondo said. “Since Putin moved troops to Ukraine’s border, gas prices have exceeded $1.40 a gallon. The president is asking Congress and others for possible ideas. But as you say, the reality is It’s that there isn’t much to be done.”
Fuel prices are rising in line with oil prices, which continued to climb on Friday.
West Texas Intermediate crude, which is the US benchmark, rose nearly $1 and was selling at $122.50 a barrel as of Friday morning.
International benchmark Brent crude rose nearly 1% and was trading north of $124 a barrel.
The US central bank will increase its key interest rate by 50 basis points in June and July, with a similar move likely in September, according to a Reuters poll of economists who see no rate stagnation until next year.
Analysts expect the price of oil to either close or possibly exceed $140 this summer as demand picks up — coinciding with the travel season.
The debate over whether the US has reached “high inflation” is important because analysts say it will give them a better indication of how the Federal Reserve will adjust monetary policy going forward.
Faced with inflation hitting a four-decade high and further tightening in the labor market, the Fed is under pressure to move its policy rate to a neutral level that neither stimulates nor restricts – and ahead of him.
All 85 economists in a June 6-9 Reuters poll had predicted a 50 basis point federal funds rate hike of 1.25%-1.50% on Wednesday, following a similar move last month.
Another such hike was set for July by only a handful of survey contributors.
“The bad news for the Fed is that inflation is now so well above target that it has no choice but to tighten aggressively,” said Ethan Harris, global economist at Bank of America Securities.
Most Americans believe inflation is going to get worse in the near future, with two-thirds of those surveyed saying they expect prices to continue to rise.
The Washington Post reported that a national survey of more than 1,000 adults in late April and early May found that 66% expect prices of essential goods and services to rise next year.
Meanwhile, just 21% said they expect the cost of everyday items like gas and groceries to go down, while 12% said they expect inflation to remain the same, according to George Mason University. Shar is according to a survey conducted by the newspaper along with the school. Policy and Government.