Source: https://upload.wikimedia.org/wikipedia/commons/6/60/Bundesarchiv_Bild_102-00193%2C_Inflation%2C_Ein-Millionen-Markschein.jpg

Inflation Reaches 9.1%, a New 40-Year High

U.S. consumer inflation as tracked by the Consumer Price Index (CPI) has reached a new 40-year high of 9.1% in June, the Bureau of Labor Statistics (BLS) reported on July 13th. It is the highest annual rate of inflation since November of 1981. Key things to note as part of the 9.1% reported number.

1. Core inflation, which excludes food and energy prices, decelerated slightly to a 5.9% annual rate, from 6.0% recorded in May

2. Prices for gasoline and other energy products far outpaced all other price categories, driven by rising oil prices during the first half of June

Source: U.S. Bureau of Labor Statistics

What does this mean for consumers, especially in terms of food & energy prices?

Food inflation continued on an upward trajectory, recording a 10.4% year-over-year increase in June. Food at home, which tracks the prices of groceries and other consumer staples, rose at a 12.2% annual rate, outpacing the comparatively lower 7.7% rate recorded for food away from home. Within this category, prices for meat, poultry, and eggs rose 11.7% on an annual basis. 

Gasoline prices rose 11.2% month-over-month, and just shy of 60% year-over-year. Energy prices at large increased at a monthly rate of 7.5%, and 41.6% year-over-year. The annual largest increase within the energy category came from prices for fuel oil, which rose at a blistering 98.5% rate year-over-year.

What is the Fed doing about this?

The Fed has been raising rates aggressively this year in an attempt to combat soaring inflation. he Fed’s current policy stance marks a sharp divergence from the previous two years, when the nation’s central bank kept interest rates at record low levels in order to stimulate the economy following the onset of the COVID-19 pandemic.