US inflation stays near 40-year high fuelling fears of price surges

FEARS that price surges are spreading through the US economy delivered a fresh blow to Joe Biden yesterday as inflation remained stubbornly close to a four-decade peak.

Official figures revealed consumer prices jumped 8.3pc in April compared to a year earlier, a smaller than expected easing in inflationary pressures.

Inflation, barely falling from the fourdecade peak of 8.5pc hit in March, fuelled expectations of rapid interest rate rises and ramped up the pressure on the White House.

Bond and stock markets were roiled by core prices – which strips out energy and food – jumped 0.6pc on the month, a sign inflationary pressures are spreading in the world’s largest economy.

Rising costs of airfares, food and new vehicles helped to keep inflation at elevated levels in April even as petrol prices came off recent highs.

Andrew Hunter, economist at Capital Economics, said the figures could force the Federal Reserve into drastic action to rein in the price pressures, including a triple interest rate rise next month.

He said: “The data will strengthen the Fed’s resolve to continue hiking rates by 50 basis points at the next couple of meetings – and may lead to renewed speculation about a 75 basis point hike or an inter-meeting move.”

Signs that the cost-of-living crisis will be even more persistent than feared will increase the pressure on Mr Biden to outline support.

The US president said on Tuesday that inflation is his “top domestic priority”

but the price surge has sent his approval ratings sliding to new lows.

He admitted that “families all across America are hurting” as he blamed the Ukraine conflict and Covid for the country’s economic woes. Mr Biden placed the burden for his party’s top political problem with the central bank.

He said that action to lower prices “starts with the Federal Reserve, which plays a primary role in fighting inflation in our country”.

Economists expect price rises to slow only gradually and warned the cost-ofliving crisis will dampen US growth.

Karl Thompson, economist at the Centre for Economics and Business Research, said yesterday: “Today’s data suggest that the pace of this deceleration may be slow. Further anti-inflationary action by the Fed, in the form of rate rises and quantitative tightening, is now a more likely prospect over the coming months, adding to existing downside risks to US growth.”

Official data earlier this week showed that while household debt levels are rising, there is still not enough evidence that people’s wallets are stretched.

Several Fed policy makers said they are keenly watching household balance sheets to gauge how much longer Americans can keep up with spending.