Those who hoped the worst was over will have to wait. Inflation in the United States reached 9.1% over one year in June, a record since November 1981. This figure, worse than expected, marks a clear deterioration compared to the previous month, when the general increase had reached 8.6%.
Month-on-month, the trend is accelerating, with prices rising 1.3% in June, compared to +1% in May and +0.3% in April, data showed on Wednesday 13 July by the US Department of Labor.
This poor figure should force the US Federal Reserve (Fed, central bank) to raise its key rates again at its meeting at the end of July, by 0.75 points, or even one point if we are to believe the market expectations. The monetary institution’s short-term rates are currently pegged at between 1.5% and 1.75%, down from just above zero in March.
The boom in inflation is explained by the very sharp rise in energy prices (+7.5% over one month, +41.6% over one year), but also in food (+1% over one month, + 10.4% over one year). However, prices excluding energy and food, which constitute core inflation, continued to accelerate, with an increase of 0.7 points against +0.6 in the previous months. Over one year, this core inflation fell slightly, since it reached + 5.9% after having peaked at + 6.5% in March, a trend welcomed by President Joe Biden.
The exegesis of the figures does not bring anything reassuring, except for a slight drop in the price of plane tickets, which can be seen on the ground.
No inflation-wage spiral
The only positive news remains the evolution of weekly wages, which only increased by 4.2% over one year, against a peak of +4.6% in April. Americans are losing purchasing power, with a real decline of 4.4% in weekly wages, but the advantage of this situation is that there is still no inflation-wage spiral. The labor market remains excellentwith 372,000 job creations in June, a higher rate than expected and an unemployment rate of 3.6% of the active population, at its lowest.
In this context, observers consider it unlikely that the United States will be in recession. This good health of the economy, despite the announcements of the tech on the slowdown in hiring, complicates the task of the Fed. The cooling of the economy will not come by itself and the central bank risks causing a decline in economic activity itself.
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