WASHINGTON, June 10, 2022 (Xinhua) — Inflation in the United States has reached its highest level since December 1981, which raises the question of when the worst price hike in 40 years will peak and decline.
May saw inflation accelerate further, with prices up 8.6 percent compared to the same period last year, according to monthly consumer price index numbers released Friday by the US Bureau of Labor Statistics.
Stock markets fell on Friday, dashed hopes of a quick end to the current inflation.
The Dow Jones Industrial Average lost 880 points and the Standard & Poor’s 500 Index lost 117 points. The Nasdaq index fell by 414 points by the end of trading on Friday.
“Today’s very disappointing inflation numbers do not leave the US Federal Reserve much room to take its foot off the monetary policy brake” and regain control of inflation.
Indeed, some fear that a Federal Reserve rate hike will lead to a recession that will further hit markets — which have been in decline in recent months — as well as US citizens’ wallets.
There is still no consensus among economists about the pace at which price increases will peak and subside.
Some believe that prices will find their way down very slowly. Others believe that inflation will begin to decline in the next two to three months.
Core inflation, which does not include volatile food and energy prices, rose by 6 percent, higher than the estimated 5.9 percent.
And contributed to this increase in food, gasoline and housing prices.
Energy prices rose 3.9 percent from the previous month, posting an annual increase of 34.6 percent. Fuel oil has risen 106.7 percent over the past 12 months.
Food prices rose to 10.1 percent compared to last year.
“We may have seen peak inflation,” Dean Baker, chief economist at the Center for Economic and Policy Research, told Xinhua, but added that a huge amount depends on energy and food prices, which in turn depend to a large extent on the conflict in Ukraine.
“If a ceasefire agreement is reached, I expect the prices of oil, wheat and a number of other commodities to fall sharply,” Baker said.
“This will play a major role in reducing inflation,” Becker noted.
For his part, Sam Pollard, chief economist at Wells Fargo, a major US bank, told Xinhua, “For everyone who had hoped that core inflation would peak early, unfortunately that (hope) has been shattered.”
“There is very little relief on the horizon, at least in the coming months,” Pollard said, noting that food and gasoline prices were still rising.
“Inflation continues to accelerate, we haven’t peaked yet, and even when we do, the moderation will be painfully slow,” Bullard added.
Lachman said the recent surge in international oil prices to more than $120 a barrel cast doubt on any notion that inflation would peak any time soon.
Some analysts fear that inflation threatens to prompt the Federal Reserve to raise interest rates to the point where a recession could occur.
And if that happens, the markets will undoubtedly fall further, even after dropping from record highs in recent months.
Lackman noted that since the beginning of the year, the decline in stock and bond market prices has evaporated about $12 trillion in household wealth.
Any further loss of such wealth “should increase our risk of a hard economic downturn by early next year,” Lachman said.
On the other hand, the White House feels voters’ anger over the issue.
Approval of US President Joe Biden’s job performance is at an all-time low, at 39.4 percent, according to the average poll conducted by RealClearPolitics.
“Inflation remains a huge problem for Biden and will definitely hurt Democrats in November if it continues at such a high rate,” Daryl West, a senior fellow at the Brookings Institution, told Xinhua. /ts/