Soaring gasoline, food prices boost U.S. consumer inflation in May -Breaking
© Reuters. FILE PHOTO – Shoppers seen shopping in a Walmart Store, North Brunswick, New Jersey. U.S. July 20, 2020. REUTERS/Eduardo Munoz
WASHINGTON, (Reuters) – U.S. consumer price inflation accelerated in May. Record gasoline prices and rising costs of services led to an increase in fuel prices. The Federal Reserve may continue its interest rate increases at 50 basis points through September as a way to fight inflation.
Labor Department reported Friday that the consumer price index rose 1.0% in May after rising 0.3% in April. Reuters polled economists and predicted that the CPI would rise 0.7% monthly. According to AAA data, gasoline prices rose by 4.7% in May. They averaged $4.37 per gallon.
The CPI was hovering at $5 per gallon Friday. This indicates that they will continue to rise in June.
Last month’s inflation was also driven by rising prices of other goods, such as food. This has happened in response to Russia’s provocation war against Ukraine. China’s Zero COVID-19 policy which disrupted supply chains is seen as keeping the goods prices high.
Last month, prices for services such as rents and hotel accommodations were high. It was hoped that shifting spending away from goods and services would cool inflation. Tight labor markets are driving up the cost of services and contributing to higher wages.
Inflation reports were published before the Fed’s expected second rate increase of 50 basis points next Wednesday. It is anticipated that the U.S. central banking will raise its policy rate an additional half-point in July. The overnight rate has been pushed up by 75 basis point since March.
“Continuedly strong monthly inflation could indicate that the Fed is more explicit in guiding towards policy rates increasing by 50 basis point or more until inflation data proves to be convincingly slowing,” stated Veronica Clark, an economist at Citigroup New York (NYSE:).
The CPI rose 8.6% in the 12 months ending May after climbing 8.3% during April. The economists had expected that April would be the peak of the annual CPI.
Last month, both the undercurrent inflation and rents and airline fares were equally high.
After rising by 0.6% in April, it was unchanged if you exclude volatile food and energy.
Core CPI was 6.0% higher in May than the previous 12-months. This follows a 6.2% increase in April. The Fed has set a 2% inflation target, but the rate of inflation is far higher than that.