Inflation remained painfully elevated in June, with the Consumer Price Index climbing 9.1 percent from a year earlier, the fastest pace since 1981. The number was hotter than economists had expected, and spelled trouble for American consumers who are trying to make ends meet and for the Federal Reserve as it tries to contain rapid price increases.
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The 9.1 percent increase came in large part because gas prices jumped in June, which means that July could see some moderation: Gas prices have fallen this month. Even so, other details in the report are worrying.
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The core index, which strips out volatile food and fuel prices to give a sense of underlying inflation trends, came in at a quicker-than-forecast 5.9 percent, and unexpectedly picked up on a monthly basis.
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The increases were broad-based. Food is much more expensive. Rent prices climbed by the most since 1986. An array of services are becoming pricier.
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At the same time, there are hints that the price of goods might be moderating. Sporting goods were a bit cheaper. Televisions have been falling in price, and that continued.
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The upshot for the Fed, which is responsible for price stability, is bad: “It’s an ugly report,” said Julia Coronado, founder of MacroPolicy Perspectives. “I don’t think there is anything good about this report, as far as the Fed is concerned, as far as the U.S. consumer is concerned.”
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The Fed is expected to raise interest rates by 0.75 percentage points later this month, but investors increasingly anticipate an even larger 1 percentage point move following the report, based on market pricing.
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For American shoppers, this report was confirmation that this economy is incredibly challenging to navigate. Wage increases are not keeping up with prices, and the cost of everyday essentials is shooting rapidly higher. Food prices rose 10.4 percent in the year leading up to June, the biggest annual increase since 1981.
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