(Washington) Prices in the United States rose again in June, inflation reached 9.1%, mainly due to the explosion in gasoline prices, which increases the pressure on Joe Biden, who is called to act for household purchasing power.
Posted at 8:40am
Updated at 6:11 p.m
This surge, the strongest in a year since November 1981, threatens growth as consumption is the main driver of the US economy.
It also weighs on the Democratic leader’s popularity with the renewal of a large chunk of the elected congressman just months before a key election date.
The Consumer Price Index (CPI), which was up 8.6% yoy in May, rose even more than analysts had expected in June.
The consumer price index, which is designed to better reflect core inflation which excludes the most volatile sectors such as energy and food, recorded a 5.9% increase in June 2022 compared to June 2021.
On a monthly basis, the increase was 1.3% in June, up from 1.0% in May, according to figures released by the Labor Department.
Republicans responded quickly on Twitter, with Senator Marco Rubio accusing Democrats of “not caring about the things that matter to the average American.”
Joe Biden admitted in a statement that these figures were “too high” and recalled that fighting inflation was his “priority”.
But, he immediately added for clarification, they are “obsolete” because gasoline prices have fallen in recent weeks.
The average price per gallon in the United States has even fallen back to around $4.63 now, after climbing above the symbolic $5 mark for the first time in June.
This “should bring some peace of mind to American families,” Biden said.
Consumers had accumulated significant savings during the COVID-19 pandemic, thanks in particular to significant government subsidies and spending limited by containment measures and activity restrictions.
But last year’s strong recovery in demand, combined with problems in supply chains, led to high inflation, which worsened with the rise in energy prices triggered by Russia’s invasion of China and Ukraine in late February.
Rate hike by one point?
The price hike in June affected all sectors, the Labor Department said in a statement. But the biggest contributors to this increase were housing, gas and food, spending at the heart of everyday life.
In particular, energy prices rose 41.6% year-on-year, the sharpest increase since April 1980.
Food prices rose the most since February 1981, rising 10.4% in a year.
Excluding the more volatile food and energy prices, so-called core inflation accelerated to +0.7% for just over a month. But it has settled at +5.9% for the third straight month over a year.
Vacation rentals and airline tickets were among the few goods and services to decline in June.
However, this slight slowdown and price drop at the pump should not be enough to prompt the US Federal Reserve (Fed) to ease its current policy.
The Fed began aggressive rate hikes in March to dampen demand and calm this price hike. It even increased it by three-quarters of a percentage point in June, the largest increase since 1994.
These interest rates, which govern loans to individuals and businesses, now range between 1.50% and 1.75%.
For Pantheon Macroeconomics’ Ian Shepherdson, underlying inflation should continue to fall in the coming months, particularly due to lower wage increases, the fall in commodity prices and the strengthening of the dollar, which is making imports cheaper for Americans.
But the latest inflation numbers “will make the Fed very uncomfortable,” he predicts.
The central bank is expected to hike rates by another three-quarters point at its next two meetings in July and September, says Oxford Economics’ Kathy Bostjancic.
Others conjure up the scenario of a one-point rate hike in what would be a first since the 1980s.
This door-opener for an even stricter monetary policy in the USA caused the euro to temporarily fall below the symbolic threshold of one dollar, which it has not exceeded since December 2002.
This idea also strained Wall Street, where the main indices ended in the red.