US 40-year high skyrocketing inflation pressuring Biden
Despite Biden's confidence that the US can overcome the 40-year high inflation, experts believe that a pause in rate hikes is unlikely.
-
According to a Labor Department report, prices continued to rise last month for goods, setting new records in multiple categories.
US inflation surged to a new four-decade high in May, defying hopes that price pressures had peaked and deepening President Joe Biden's political troubles as Americans struggle to meet the cost of essentials like food and gas.
Government data released Friday put inflation at 8.6%, extending increases not seen for a generation, with gas prices hitting daily records fueled by the war in Ukraine and supply chain challenges related to the Covid-19 pandemic.
Biden claims US better positioned to overcome the global inflation
Biden, whose popularity has taken a hit as prices surge just months before November's midterm elections, has made fighting inflation his top domestic priority but is finding he has few tools to directly affect prices.
"We're better positioned (than) just about any country in the world to overcome the global inflation we're seeing and to take the next step towards forming a historic recovery," he claimed while speaking at the Port of Los Angeles.
The US President cited releasing 30 million barrels of reserve oil and repeated his call to approve legislation to go after firms such as shipping companies that are taking advantage of limited competition to impose steep price hikes.
Goods prices continue to rise
The new data were sad news for Biden, as the consumer price index (CPI) jumped 8.6% compared to May 2021, up from 8.3% in the 12 months ending in April and topping what most economists thought was the peak of 8.5% in March.
According to a Labor Department report, prices continued to rise last month for goods including housing, groceries, airline fares, and vehicles, setting new records in multiple categories.
Some economists expected the easing of pandemic restrictions to cause a shift of US consumer demand toward services and away from goods, which they said would ease inflation pressures, but prices for services increased as well.
Largest increase in history of CPI
Energy has soared 34.6% over the past year, the fastest since September 2005, while food jumped 10.1% - the first increase of more than 10% since March 1981, the report highlighted.
Fuel oil more than doubled, jumping 106.7%, the largest increase in the history of CPI, which dates to 1935.
Food and fuel prices have accelerated in recent weeks and American drivers are facing daily record gas prices, with the national average hitting $4.99 a gallon on Friday, according to AAA.
The Federal Reserve has begun raising interest rates aggressively, with another big hike expected next week, and more ahead in the coming months.
The CPI surge "raises the probability of even more aggressive Fed rate hikes to tamp down on inflationary expectations," explained Mickey Levy of Berenberg Capital Markets, adding that a pause in rate hikes in September is "looking increasingly unlikely."
