Consumer prices surged in June
Central bank calls inflation transitory
Prices paid by U.S. consumers surged in June by the most since 2008, topping all forecasts and showing that higher costs associated with the economy’s reopening continue to fuel inf lationary pressures.
The consumer price index jumped 0.9% in June and 5.4% from the same month last year, according to Labor Department data released Tuesday. Excluding the volatile food and energy components, the so-called core CPI also rose 0.9%. The core increased 4.5% from June 2020, the largest advance since November 1991.
Used vehicles accounted for one-third of the gain in the CPI last month, the agency said. The outsize increase in the June CPI was also driven in large part by the pricing rebound in categories associated with a broader reopening of the economy, including hotel stays, car rentals, apparel and airfares.
Expectations that those increases will normalize help explain the Federal Reserve’s view that inf lation is transitory.
With inflation, from the Fed “we are told the story is transitory but the increases are going faster and for longer,” John Ryding, chief economic advisor at Brean Capital said on Bloomberg Television. “We just had a monthly increase that was about double what was expected.”
The median forecasts in a Bloomberg survey of economists called for a 0.5% gain in the overall CPI from the prior month and a 4.9% year-over-year increase. Treasury yields climbed following the data, while the dollar jumped and S&P 500 futures fell.
The year-over-year figures have shown outsize gains in recent months, partly because of so-called base effects — the CPI retreated from March through May of last year during the pandemic lockdowns. While the annual figures are expected to peak, it’s not yet clear how much moderation will occur over the coming months.