Prices for consumer goods and services increased 1.3% in June—up from 1% in May—in the largest jump since 2005, driving the annual inflation rate up to 9.1% from 8.6% in May, the Bureau of Labor Statistics reported Wednesday. The Consumer Price Index’s increase was worse than economists anticipated, and marked a fresh high since 1981. Food and gas drove much of the overall increase, but even without these items, which are prone to big swings, the “core” inflation rate rose 0.7%, an acceleration from 0.6% in May and April, making for a 5.9% annual increase. The surprisingly fast price increases, especially for core items, dashed our hopes that the worst of inflation was over. The report sent stocks down and raised the odds that the Federal Reserve will be more aggressive in its ongoing campaign of hiking its benchmark interest rate to get inflation under control, a move that will make mortgages, car loans, personal loans, and other types of credit more expensive. Faster and steeper rate hikes will inevitably slow the economy down and raise the odds of a recession and job losses, economists said. “Rather than cooling down, inflation is heating up,” Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary Wednesday. “Inflation may not peak for a while, and might remain stubbornly high for longer than anticipated.” The price increases were widespread, with nearly everything getting more expensive outside a few odd categories such as heating oil, airline fares, and a handful of food items. Used cars and trucks rose for a second month, jumping 1.6%, while new vehicle prices continued to rise, going up 0.7%. Housing costs, a major component of core inflation, rose 0.6%, reflecting rising rent and homebuying costs finally showing up in the index, economists said—a trend that’s likely to keep inflation readings elevated for many months to come. The one saving grace of the report is that some of the items that stoked June’s inflation have gone down in price since then, economists said. A gallon of regular unleaded gas has fallen to $4.63 a gallon after topping $5 in mid-June, according to data from GasBuddy. Some retail prices have also fallen. But the stubborn core inflation rate suggests the fight against inflation might be a long and painful one. Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
