August 16, 2022

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Highest price growth in the US in more than 40 years - E24

Highest price growth in the US in more than 40 years – E24

Inflation in the United States fell by 9.1 percent in June, compared to the same month last year. This is the highest price increase since 1981.

Food prices also contribute to high inflation rates. In June, food prices increased by 9.1 percent compared to May last year.
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This is shown by the latest figures from the US Department of Labor’s Statistics Wing.

Analysts had previously expected prices to increase by 8.8 percent in June, the same as the annual rate of inflation the previous month, according to Bloomberg.

Chief Economist Marius Gunsholt Hof at Handelsbanken says the inflation figure was above expectations.

– The Fed does not want to see this. What I particularly noticed is that core inflation was higher than expected. He says it is quite certain that the central bank will get a new triple increase at the next July meeting.

Core inflation was 5.9 percent in June, down from 6 percent in May compared to the same period last year.

The core inflation rate was expected to decline for the third consecutive month. Excluding energy and food prices, core inflation in June was expected to be 5.7 percent, down from 6 percent in May. Core inflation in the US peaked in March at 6.5 per cent.

The central bank is believed to be in its wake

The US Federal Reserve has been clear this year that curbing high inflation will be the most important thing going forward. Like the Bank of Norway and many other central banks, the Federal Reserve has a goal of keeping inflation at around 2 percent.

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Hof says the US Federal Reserve is in arrears and is in a tough spot.

To curb inflation – which is the Fed’s obvious goal – they have to curb demand in the economy. If it means that interest rates must be raised faster, that would give a clear risk of recession — but it’s a price the US Federal Reserve is willing to pay, Hof says.

The chief economist stresses that a recession in the US economy is not the main forecast for Handelsbanken.

— but there is clearly a danger of that, says Hoff.

Expect interest rate hikes two or three times in July

At its June rate meeting, the Federal Reserve raised its key rate by 0.75 percentage points in one round for the first time since 1994 – the so-called triple increase. Central Bank Governor Jerome Powell stated when the rate hike was announced that inflation in particular made it necessary to raise interest rates higher than expected.

The interest rate minutes from the meeting showed that central bank members believed that it would probably be correct to raise the interest rate by another 0.5 or 0.75 percentage points at the next interest rate meeting on July 27.

“I think it’s increasingly likely that there will be a tripling in September,” says Huff.