The United States inflation rate rose from 8.6% in May to 9.1% year-on-year in the month of June, the U.S. Bureau of Labor Statistics reported on Wednesday.
The number is higher than the 8.8% projected by economists and the highest since 1981. Indicating that the Federal Open Market Committee’s (FOMC) recent aggressive rate increase has not been effective and could compel the Fed to move even more aggressively.
On a seasonally adjusted basis, inflation for all urban consumers grew 1.3% in June, after rising by 1% in the month of May.
According to the Bureau, the increase was broad-based, with the indexes for gasoline, shelter, and food being the largest contributors.
The energy index increased by 7.5% over the month and contributed nearly half of the all items increase, with the gasoline index rising 11.2 percent and the other major component indexes also rising. The food index rose 1.0 percent in June, as did the food at home index.
The persistent increase in inflation rate despite efforts to rein in consumer prices and cool the world’s largest economy is now expected to hurt economic activities further, drag on consumer spending which constitutes 75% of the entire economy, hurt new job creation, retail sales and new orders, especially oversea orders.
With this, the widely projected economic recession is certain and will bolster the U.S. Dollar’s attractiveness even further as investors will look to hold their funds in Dollars to avoid high borrowing costs and better manage the negative impact of inflation.
