Inflation in the US rose unexpectedly last month to a fresh four-decade high of 8.6%, the labor department said on Friday.
The latest consumer price index (CPI) figures showed that the cost of living increased by one percentage point from April and was broad-based, with the indexes for shelter, gasoline and food being the largest contributors.
Gas prices have been soaring across the US, approaching $5 a gallon this week – $1.90 more than a year ago. According to the latest CPI report the energy index rose 3.9% over the month, with the gasoline index rising 4.1%.
Other major component indexes also increased. The food index rose 1.2% in May as the food at home index increased 1.4%.
America’s rampant inflation is imposing severe pressure on families, forcing them to pay much more for food, gas and rent and reducing their ability to afford discretionary items, from haircuts to electronics.
Lower-income and Black and Hispanic Americans, in particular, are struggling because, on average, a larger proportion of their income is consumed by necessities.
Economists expect inflation to ease this year, though not by very much. Some analysts have forecast that the inflation gauge the government reported Friday — the consumer price index — may drop below seven per cent by year’s end. In March, the year-over-year CPI reached 8.5 per cent, the highest such rate since 1982.
High inflation has also forced the Federal Reserve into what will likely be the fastest series of interest rate hikes in three decades.
By raising borrowing costs aggressively, the Fed hopes to cool spending and growth enough to curb inflation without tipping the economy into a recession. For the central bank, it will be a difficult balancing act.
Government data released Friday put inflation at 8.6%, extending increases not seen for a generation, with gas prices hitting daily records fueled by Russia’s invasion of Ukraine and supply chain challenges related to the pandemic.
Biden, whose popularity has taken a hit as prices surge just months before November’s midterm elections, has made fighting inflation his top domestic priority but is finding he has few tools to directly affect prices.
“I’m doing everything in my power to blunt Putin’s price hike and bring down the price of gas and food,” he said Friday while speaking at the Port of Los Angeles.
“We’re better positioned (than) just about any country in the world to overcome the global inflation we’re seeing and to take the next step towards forming a historic recovery.”
The president has tried to hammer home his optimistic message about economic progress in the wake of the pandemic, including rapid GDP growth and record job creation, while pressing Congress to take action to lower costs on specific products.
Biden cited releasing 30 million barrels of reserve oil and repeated his call to approve legislation to go after firms such as shipping companies that are taking advantage of limited competition to impose steep price hikes.
The cost of groceries surged nearly 12 per cent last month from a year earlier, the biggest such increase since 1979. Rising prices for grain and fertilizer after Russia’s war against Ukraine, is intensifying that rise.
Restaurant prices jumped 7.4 per cent in the past year, the largest 12-month gain since 1981, reflecting higher costs for food and workers.
Employers face immense pressure to raise pay in a job market that remains robust, with low unemployment, few layoffs and near-record job openings.
But while average wages are rising at their fastest pace in decades, they aren’t increasing fast enough for most workers to keep pace with inflation. Many households accumulated savings from government stimulus aid during the pandemic and are now having to draw on those savings to pay bills