Inflation hits 40-year high
U.S. consumer inflation reached an 8.6% annual rate in May, its highest level in more than four decades as surging energy and food prices pushed prices higher. The Labor Department recently announced the Consumer Price Index (CPI) increased 8.6% in May from the same month a year ago, marking its fastest pace since December 1981. That also was up from April's CPI reading of 8.3%. The CPI measures what consumers pay for goods and services. May's increase was driven by sharp rises in the prices for energy, which rose 34.6% from a year earlier, and groceries, which jumped 11.9% on the year . Prices for used cars and trucks rose 1.8% in May from April, reversing three months of declines. Shelter costs, an indicator of broad inflation pressures, accelerated on a monthly basis in May and were up 5.5% compared with a year ago.
May's increase was driven by sharp rises in the prices for energy, which rose 34.6% from a year earlier, and groceries, which jumped 11.9% on the year.
The annual rate of inflation has risen sharply since early 2021. As the U.S. economy has rebounded from the pandemic, massive government stimulus, supply disruptions, surging commodity and oil prices has put upward pressure on consumer goods and services for longer than policy makers anticipated. In response to runaway inflation the Fed recently raised the Fed Fund’s rate by 75 basis points (bp) – the biggest increase since 1994 – to a target of 1.50%-1.75%. Further, in an effort to douse out the inflation fire the Fed has signaled a 50 to 75 bp increase is on the table for the upcoming July meeting.
Written by Daniel Morgan, Senior Portfolio Manager
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