Inflation edged up to 2.9 percent annually in June, the Bureau of Labor Statistics reported Thursday, meeting forecasters’ expectations for it to rise to near 3 percent.
Inflation is now running at the highest rate since January of 2012, per the Consumer Price Index, the most commonly cited gauge of price movements.
[Also read: Jobless claims plunge to 214,000, lowest since May]
Higher inflation is bad from the perspective of a household, as it cuts into the purchasing power of paychecks. Workers are paying slightly more for food and nearly 25 percent more for gas over the past year. As a result, real average hourly earnings are flat on the year.
Yet from the point of view of the Federal Reserve, higher inflation is good because it suggests that the economy is performing at near its potential. For years, the Fed has seen inflation fall short of its target, signaling that it may have kept unemployment higher than it could have been.
Thursday’s report should reassure Chairman Jerome Powell and other Fed officials that the economic expansion is unfolding as they hoped. Core inflation, meaning inflation stripping out the volatile components of food and energy, picked up from 2.2 percent to 2.3 percent annually.
The Fed’s inflation target is 2 percent, but it’s measured by a different inflation gauge.
