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Inflation in US accelerates to 40-year high

This rate of inflation is worse than the previous worst Sirf News had reported in mid-January and a spate of emergency procurements the Joe Biden administration had to take recourse to

In yet another example demonstrating the Joe Biden administration’s misgovernance, inflation in the US hit a fresh 40-year high in May, accelerating in a broad advance that would exert pressure on the Federal Reserve to extend an aggressive series of interest-rate hikes and adds to political challenges for the Democrats. The consumer price index increased 8.6% from a year earlier, Labor Department data showed Friday. The widely followed inflation gauge rose 1% from a month earlier, topping all estimates. Shelter, food and gas were the largest contributors.

The core consumer price index (CPI), which strips out the more volatile food and components, rose 0.6% from the prior month and 6% from a year ago, also above forecasts.

This is worse than the previous worst. On 12 January, the Labor Department had reported that consumer prices jumped 7% in December compared with 12 months earlier — the hottest year-over-year inflation since June 1982. Excluding volatile and food prices, what is called “core” inflation rose 5.5% over the past year, the fastest such pace since 1991.

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The figures reinforce that inflation is still heated by many measures and that the Fed, which has committed to half-point hikes at each of its next two meetings, starting next week, will have to maintain that aggressive stance through its September gathering. Record gasoline prices and geopolitical factors threaten to keep inflation high in the coming months, suggesting the Fed will have to pump the brakes on the economy for longer.

Treasury yields jumped, stock futures fell and the dollar rose after the report.

In May, prices for necessities continued to rise at double-digit paces. prices climbed 34.6% from a year earlier, the most since 2005, including a nearly 49% jump in gasoline costs. Gas prices so far in June have climbed to new highs, signalling more upward pressure in coming CPI reports and therefore keeping the Fed in the hot seat.

Grocery prices rose 11.9% annually, the most since 1979, while electricity increased 12%, the most since August 2006. Rent of primary residence climbed 5.2% from a year earlier, the most since 1987.

Contributing to the inflation are factors

  • Russia’s ongoing war in Ukraine
  • stepped-up sanctions on Russia due to the war
  • potential port disruption due to the upcoming West Coast dockworker contract expiration
  • Covid-related lockdowns in China

That likely spells further trouble for President Joe Biden, whose approval ratings have sunk to new lows ahead of midterm elections later this year. While the job market remains a bright spot, decades-high inflation is crippling confidence among the American people and largely outpacing wage gains.

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