Americans Are Uncomfortable As CPI Makes Its Biggest Gains In 41 Years

With gasoline prices hitting new highs and food costs rising, US Consumer Price Index (CPI) rose sharply last month. Thus, resulting in the biggest 12-month rise in more than 40 years.

CPI Makes Gains In 41 Years

Many analysts predict that the Fed will likely keep increasing rates till at least September to lower inflation rates. Last month’s inflation data released by the labor department created a sharp rent increase.

Rents rose to levels not yet seen since 1990. Many us residents are now cutting down on their expenses by force due to this persistent increase in prices. There are also fears that the country might plunge into a recession soon.

With the midterm elections coming up in November, president Joe Biden and his team need to work hard to resolve this inflation issue. Otherwise, their political points might be lower than they can imagine.

A recent Reuters survey on June 10 revealed that this month’s consumer sentiment is at an all-time low. However, there might be changes before this month is over. Compared to 0.3% gains in April, the nation’s CPI gained 1.0% last month. The rise exceeded economists’ predictions of 0.7% for last month.

After a 6.1% fall in April, gas prices shot up by 4.1% last month. TripleA data shows that the average gasoline pump price for last month was $4.37 per gallon. As of June 10, the prices were close to $5 per gallon.

Thus, indicating that the CPI index for this month would likely exceed last month. Electricity costs rose by 1.3% last month, with natural gas prices also rising. Their prices are the highest in 16 years.

The Largest 12-Month Rise Since 1981

The 8.6% rise in CPI for last month is the highest 12-month rise in this index since December 1981. The increase surpassed economists’ predictions that the 8.3% rise in April would be the peak. All indicators show that inflation rates soared higher than the Fed’s predicted 2%.

Thus, wearing off any wage gains. Using this inflation rate to adjust average hourly earnings for last month shows that earnings dipped by 0.6%. The Fed has hinted that a rate rise of 50 basis points is likely. However, the announcement would be made on Wednesday, June 15.

However, some economists suggest that the Fed might increase rates by up to 75 basis points. Nevertheless, America’s apex bank is still planning to raise rates by at least 0.5% next month. Many economists had predicted that the fed would increase rates by 25 points in September.

However, the current inflation rise is making them change their minds. Hence, they now predict that the Fed might likely increase rates again by 50 points in September.

Analysts expected that residents’ switching expenses from goods to services would lower inflation. However, wages are increasing thanks to the labor market. Hence, the increase in the prices of services.