<mediadc-video-embed data-state="{"cms.site.owner":{"_ref":"00000161-3486-d333-a9e9-76c6fbf30000","_type":"00000161-3461-dd66-ab67-fd6b93390000"},"cms.content.publishDate":1654723849755,"cms.content.publishUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"cms.content.updateDate":1654723849755,"cms.content.updateUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"rawHtml":"
var _bp = _bp||[]; _bp.push({ "div": "Brid_54723734", "obj": {"id":"27789","width":"16","height":"9","video":"1027584"} }); ","_id":"00000181-453a-d702-a3cf-4ffb25b50000","_type":"2f5a8339-a89a-3738-9cd2-3ddf0c8da574"}”>Video EmbedInflation quickened to 8.6% for the 12 months ending in May, according to the consumer price index, a discouraging sign for the prospects of the economy.
The much-anticipated numbers reported by the Bureau of Labor Statistics on Friday revealed that inflation is still going strong despite the Federal Reserve’s interest rate hikes and is the worst it has been since 1981, when the Great Inflation helped bring President Ronald Reagan to office.
JOBS REPORT GIVES FED MORE AMMO TO KEEP HIKING RATES
The soaring inflation has eaten into President Joe Biden’s approval ratings as he and Democrats approach the midterm elections. Consumer prices have been rising fast since August, especially for staples such as food and gas. Until March’s CPI report, inflation had risen every month for eight months.
“So much for the idea that inflation has peaked. Consumer prices blew past expectations,” said Greg McBride, chief financial analyst at Bankrate.
Notably, the core personal consumption expenditures price index, which strips out energy and food prices, increased after tumbling in April and is up to 6% on an annual basis.
“My administration will continue to do everything we can to lower prices for the American people,” Biden said in a statement.
The Federal Reserve announced in March that it would raise its interest rate target by a quarter of a percentage point, the first rate hike since 2018, in an effort to rein in the higher prices, although some economists and many Republicans say the central bank should have moved sooner to reverse its pandemic emergency measures.
Last month, the Federal Open Market Committee announced it would increase its interest rate target by half a percentage point. The central bank typically raises rates by just a quarter of a percentage point, so the move is synonymous with two rate hikes at once and shows that the Fed is incredibly concerned with the growing prices.
The central bank is also expected to conduct more half-point hikes at its next meetings in June and July, meaning that all indications are that interest rates will continue to rise over the next year.
“Any hopes that the Fed can ease up on the pace of rate hikes after the June and July meetings now seems to be a long shot,” McBride said. “Inflation continues to rear its ugly head, and hopes for improvement have been dashed again.”
Further adding to the inflationary flames is the war in Ukraine. The conflict has pushed energy prices through the roof because Russia is one of the world’s largest producers of oil and natural gas.
Gas prices this week also hit a new record high and are flirting with a national average of $5 per gallon of gasoline. The higher fuel prices have fanned the flames of inflation and have made it more difficult for people to make ends meet.
“Prices at the pump are a major part of inflation, and the war in Ukraine is a major cause of that,” Biden said. “The United States is on track to produce a record amount of oil next year, and I am working with the industry to accelerate this output.”
There are also concerns that the Fed’s aggressive action to hike interest rates could plunge the economy into a recession, a prospect that also doesn’t bode well for Biden and Democrats who have been running on the strong labor market and country’s ultralow unemployment.
There are still some positive aspects of the economy that will bolster the Fed in its resolve to keep hiking interest rates.
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The economy beat expectations and added 390,000 jobs last month. Additionally, the country’s unemployment rate remained at 3.6%, an ultralow level that is just about where it was at right before the pandemic hit the economy more than two years ago.
May was the first month that has reflected both rate hikes that the central bank has conducted, and the fact that payrolls came in higher than forecast gives the Fed ammo to keep pushing rates ever higher, especially after several previous months of positive job gains.
