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Inflation hits 40-year high

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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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