The US consumer price Index (CPI) rose 1% month on month in May and 8.6% year on year, the third consecutive month of above 8% growth, the Labor Department said Thursday.
Although the Federal Reserve has begun a tightening cycle and said it would proceed at a brisk pace with interest rate hikes and balance-sheet shrinkage, inflation, the worst in 40 years, has yet to abate. Persistently high inflation is putting pressure on the Federal Reserve, making it increasingly difficult for the central bank to walk a tightrope while the risk of a US recession grows, economists said.
High inflation is unlikely to 'peak'.
Year-over-year CPI inflation has been above 6% for eight consecutive months since October. The latest data showed CPI growth in May was the fastest since December 1981, and the month-on-month rate was significantly higher than in April. Excluding volatile food and energy prices, core CPI rose 0.6 per cent month-on-month and 6 per cent year on year, both higher than consensus forecasts.
Energy prices rose 3.9 per cent month-on-month and 34.6 per cent year on year, the biggest year-on-year rise since September 2005. Gasoline prices rose by 4.1 percent month-on-month and 48.7 percent year-on-year. Food prices rose 1.2 per cent month-on-month and 10.1 per cent year on year, the first time in more than 40 years that the index has exceeded 10 per cent.
Some economists had argued that INFLATION may have "peaked" in March, but the latest data threw that argument out the window.
Sam Bullard, senior economist at Wells Fargo, told Xinhua that food and gasoline prices are still climbing and there is no sign of easing inflation for at least the next few months.
The national average price for a gallon of regular gasoline hit a record high of $4.986, up about 14 percent from a month ago and more than 60 percent from a year ago, according to data released Friday by AAA. Higher gasoline prices due to lower supply and increased demand, combined with higher crude oil prices, are likely to keep prices high in the short term.
American Enterprise Institute economist Desmond Lachman also said the recent rise in international crude oil prices above $120 a barrel casts doubt on the view that inflation will peak in the near term.
Us Inflation is unacceptably high and is expected to remain high, US Treasury Secretary Janet Yellen said at a Senate Finance Committee hearing on Thursday.
The risk of recession has risen
The latest data suggest that the Fed has a long way to go to rein in soaring inflation and that the odds of a US recession are rising.
At its regular monetary policy meeting in March, the Fed raised the target range for the federal funds rate by 25 basis points from near zero, kicking off an inflation-fighting tightening cycle. In early May, the Fed raised interest rates by 50 basis points and indicated that there could be more 50 basis point increases to come.
Wells Fargo Securities economists Sarah House and Michael Plesser said in a note that May data show inflation remains higher than the Fed would like, and expect the Fed to continue to tighten monetary policy, leaving little doubt of a 50 basis point rate hike at next week's meeting.
As the Fed moves more aggressively to fight inflation, a growing number of economists see the risk of a us recession rising.
Rachman told Xinhua that the fall in stock and bond market prices since the start of the year has wiped out about $12 trillion worth of US household wealth, which if sustained will increase the risk of an economic "hard landing" early next year.
The Federal Reserve is unlikely to achieve a "soft landing" for the economy given the severity of inflation and the level of unemployment, and its policies could lead to a recession, former Fed Vice Chairman Randall Quarles said in an interview.
According to a survey of chief financial officers released by CNBC on Tuesday, 77 percent of respondents believe the US economy will slip into recession in the first half of 2023, and none of the 22 chief financial officers surveyed thought a recession can be avoided.
The White House is also under intense pressure from persistently high inflation. U.S. President Joe Biden's approval rating is at an all-time low of 39 percent, according to a new poll from political news and polling data aggregator. Darrell West, a senior fellow at the Brooking s Institution, told Xinhua that if inflation continues at this pace, it will certainly hurt the Democratic Party's midterm election prospects in November.
Source: The XinHua Agency
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