<mediadc-video-embed data-state="{"cms.site.owner":{"_ref":"00000161-3486-d333-a9e9-76c6fbf30000","_type":"00000161-3461-dd66-ab67-fd6b93390000"},"cms.content.publishDate":1657743732285,"cms.content.publishUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"cms.content.updateDate":1657743732285,"cms.content.updateUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"rawHtml":"
var _bp = _bp||[]; _bp.push({ "div": "Brid_57729715", "obj": {"id":"27789","width":"16","height":"9","video":"1052362"} }); ","_id":"00000181-f939-d77e-a3bf-ff3de4ac0000","_type":"2f5a8339-a89a-3738-9cd2-3ddf0c8da574"}”>Video EmbedInflation as measured by producer wholesale prices ticked up to a red-hot 11.3% for the year ending in June, according to a report Thursday from the Bureau of Labor Statistics, near the highest on record.
Thursday’s report comes a day after headline inflation as measured by the consumer price index exploded to 9.1% for the 12 months ending in June, the highest level since 1981 and a bigger increase than expected.
AVERAGE REAL EARNINGS PLUNGED 3.6% IN PAST YEAR AS INFLATION MADE WORKERS POORER
The new producer price index numbers are just another indicator that prices are wildly out of control even as the Federal Reserve moves ever more aggressively to jack up interest rates to rein in the country’s historic inflation.
The PPI gauges the wholesale prices of goods, which are eventually passed down to consumers.
“Despite a modest improvement in supply conditions, price pressures will remain uncomfortable in the near term and bolster the Fed’s resolve to prevent inflation from becoming entrenched in the economy,” economists with Oxford Economics said.
The high rate of inflation has politically damaged President Joe Biden and undercut support for spending proposals from the White House and congressional Democrats.
Last month, the central bank hiked its interest rate target by a whopping three-fourths of a percentage point for the first time since 1994. The Fed typically raises rates by a quarter of a percentage point, or 25 basis points, so the June hike was analogous to three simultaneous rate increases.
The Fed is set to meet again later this month, and it will likely raise its rate target by another 75 basis points, although some analysts think that the central bank could act even more aggressively and raise interest rates by a full percentage point.
Nomura, a major Japanese financial holding company, is now predicting that the Fed will raise rates by 100 basis points, given Wednesday’s hotter-than-anticipated inflation reading.
Atlanta Fed President Raphael Bostic said that “everything is in play,” including a full percentage point hike, after June’s CPI report, according to Bloomberg.
There are concerns that the Fed’s aggressive cycle of rate hiking will knock the economy into a recession, fears that worsen as inflation keeps growing higher and the Fed keeps having to take a more hawkish approach to monetary policy.
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The National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” Two straight quarters of downward growth are typically viewed as recessionary by many economists.
The economy contracted at a 1.6% annual rate in the first quarter, and last week, the Atlanta Fed’s “GDPNow” tracker predicted that GDP growth will decrease in a second straight quarter, which would likely indicate that the country is in a recession.
