On Friday June 10, 2022, the report on consumer prices is expected to show that annual inflation slowed to 8.2% in May, from 8.3% in the previous month.
Highlight
- Inflation in the United States hit a new 40-year high in May and rose 8.6% from 12 months ago
- Cost of necessities increased by 1% in April to May, a huge increase from 0.3% increase from March-April
- Russia’s invasion of Ukraine has pushed up oil and natural gas prices
Inflation in the United States hit a 40-year high in May and rose 8.6% from 12 months ago, the country’s Labor Department said on Friday.
The cost of food, gas and other necessities rose by 1% in April to May, a steep increase from the 0.3% increase from March to April. Gas prices have been skyrocketing for a few months now.
High inflation has also forced the Federal Reserve to have the fastest series of interest rate hikes in three decades. By aggressively raising the cost of borrowing, the Fed hopes to cool spending and growth to contain inflation without putting the economy into recession. For the central bank, this will be a difficult balancing act.
Inflation remains high, even though the sources of rising prices have changed. Initially, strong demand for goods from Americans, who had been stuck at home for months after COVID hit, led to shortages and supply chain failures and soared prices of cars, furniture and appliances.
Now, as Americans begin to spend on services including travel, entertainment and dining out, the cost of airline tickets, hotel rooms and restaurant meals has soared. Russia’s invasion of Ukraine has pushed up oil and natural gas prices further. And with China easing strict COVID lockdowns in Shanghai and elsewhere, more of its citizens are driving, pushing oil prices even higher.
Economists point to the shift in spending from goods to services as a trend that should help moderate inflation by the end of the year. But with the steady rise in wages for many workers, prices in services are also rising.
(AP input)