U.S. inflation surged to a new four-decade high in June because of rising prices for gas, food and rent, squeezing household budgets and pressuring the Federal Reserve to raise interest rates aggressively -- trends that raise the risk of a recession.
with nearly half of the increase due to higher energy costs.
Accelerating inflation is a vexing problem for the Federal Reserve, too. The Fed is already engaged in the fastest series of interest rate hikes in three decades, which it hopes will cool inflation by tamping down borrowing and spending by consumers and businesses., and many analysts believe the trend continued in the second quarter.
After years of low prices, a swift rebound from the 2020 pandemic recession — combined with supply-chain snags — ignited inflation.Consumers unleashed a wave of pent-up spending, spurred by vast federal aid, ultra-low borrowing costs and savings they had built up while hunkering down. As home-bound Americans spent heavily on furniture, appliances and exercise equipment,and prices for goods soared. Russia’s war against Ukraine further magnified energy and food prices.
Shipping costs and commodity prices have also begun to fall, and pay increases have slowed. Surveys show that Americans' expectations for inflation over the long run have eased — a trend that often points to more moderate price increases over time. “There may be some relief in the July numbers — commodity prices have come off the boil, at least — but we are a very, very long way from inflation normalizing, and there is no tangible sign of downward momentum,” said Eric Winograd, an economist at asset manager AllianceBernstein.Delores Bledsoe, a truck driver hauling freight from Carlisle, Pennsylvania to Wisconsin on Wednesday, said her fuel costs have tripled.
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