US inflation unexpectedly accelerates to 40-year high |  Financial newspaper

US inflation hit a new 40-year high in May. unexpectedly accelerating in a broad push that puts pressure on the Federal Reserve to extend an aggressive series of interest rate hikes and deepen political problems for the White House and Democrats.

The consumer price index (CPI) increased by 8.6% compared to the previous year, The Labor Department data was released on Friday. The widely watched inflation gauge rose 1% from the previous month, beating all estimates. Housing, food and gas were the main contributors.

The so-called core CPI, which excludes the more volatile food and energy components, rose 0.6% from the previous month and 6% from the previous year, also above forecast.

The figures confirm that inflation remains high in many respects, and that fed him -who has pledged to increase by half a point in each of their next two meetings, starting next week- it will have to maintain this aggressive position until its September meeting. Record gasoline prices and geopolitical factors threaten to keep inflation elevated for the next few months, suggesting the Fed will need to rein in the economy for longer.

Treasury yields soared, stock futures fell and the dollar rose on the report.

In May, prices of basic necessities continued to rise at a double-digit pace. Energy prices rose 34.6% from a year earlier, the biggest increase since 2005, including a nearly 49% increase in gasoline costs. So far in June, gasoline prices have hit new highs, signaling further upward pressure on upcoming CPI reports and keeping the Fed in the spotlight.

price of Groceries grew 11.9% annually, the highest since 1979, while electricity grew 12%, the highest since August 2006. The rent for the principal residence rose 5.2% over the previous year, the biggest increase since 1987.

There are growing risks that pricing pressures in these categories will continue to build. Russia’s ongoing war in Ukraine, and the resulting escalation of sanctions; potential disruption to ports due to the upcoming expiration of West Coast longshoremen’s contracts; China’s Covid-related lockdowns and drought could contribute to higher food and energy prices.

That is likely to create more problems for President Joe Biden, whose approval ratings have fallen to new lows ahead of this year’s midterm elections. While the labor market remains a bright spot, decades-long inflation is undermining US confidence and far outpacing wage gains.

Wall Street tumbles after higher-than-expected US CPI, but IPSA decouples and closes higher

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