Consumer prices increased 5.4% in the year ending July, according to a report released on Wednesday by the Department of Labor.
The numbers from the consumer price index came in above forecast expectations of 5.3% and still buoy concerns that inflation could be coming in too hot as the government spends trillions in an effort to boost the recovery from the COVID-19 pandemic.
Wednesday’s figure continues the recent trend of eyebrow-raising inflation rates, with June inflation sitting at 5.4%, the highest number since 2008. The indicies for shelter, food, energy, and new vehicles all increased in July and added to the price pressures.
Inflationary pressures have been building since earlier this year amid surging demand, a country flush with federal spending, and rising wages. Annual inflation previously rose to 4.2% in April and grew to 5% in May.
The Federal Reserve has not acted to tighten monetary policy to curb inflation but has rather kept with its controversial easy-money policies. Fed officials have said that they do not intend to raise interest rates until inflation is running at 2% and there is full employment. The Fed has acknowledged that inflation has gotten higher than expected, but still predicts prices will fall back a bit in the coming months.
“As the reopening continues, bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect,” Powell said during a Wednesday afternoon news conference.
Inflation, combined with a perceived labor shortage in some industries, has in some senses overshadowed this year’s red-hot gross domestic product growth (GDP grew at a 6.3% rate in the first quarter and 6.5% in the second).
A recent survey found that President Joe Biden may be taking a ding from the current inflationary trend.
The latest CNBC All-America Economic Survey found Biden’s economic approval rating at 42%, a decline from April of 4 percentage points. Furthermore, 51% of those polled expressed pessimism and only 22% expressing optimism for the economy and its future.
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