Inflation Soared in June, Pinching Consumers and Challenging Policymakers

Prices surged 9.1 percent in June as consumers faced rapidly rising costs for gas, food and rent, a higher-than-expected reading and bad news for Americans at a moment when their wages are falling further behind the nation’s soaring cost of living.

The fresh Consumer Price Index report released on Wednesday contained particularly worrying signs for the Federal Reserve, providing evidence that price pressures are broad and stubborn in ways that may make them difficult to wrestle under control.

Overall, inflation is likely to moderate in July because gas prices have fallen this month — a gallon of regular gas hit an average of about $5 in June, and the cost is now hovering around $4.63. 

But fuel prices are volatile, making it impossible to know if today’s lower gas prices will last, and the report suggested that underlying inflation pressures remained intense.

In particular, a core inflation index that strips out food and fuel prices to give a sense of the broad trend remained surprisingly high. That measure climbed 5.9 percent over the year through June, barely a slowdown from last month’s 6 percent increase. Core prices also jumped 0.7 percent from May to June, more than the previous monthly increase.

Persistent price gains portend trouble for President Biden, whose approval ratings have taken a hit amid climbing costs, and could require continued forceful action from the Fed. 

The central bank is raising rates to slow the economy and to try to restrain inflation, and it is likely to continue adjusting policy quickly — even if doing so risks tipping the economy into a recession — as inflation looks increasingly out of control.

“It’s an ugly report,” said Julia Coronado, the founder of MacroPolicy Perspectives. “I don’t think there is anything good about this report, as far as the Fed is concerned, as far as the U.S. consumer is concerned.”

The global economy has been buffeted by a series of shocks that have pushed inflation higher since the outset of the pandemic.

Factory shutdowns and shipping shortages have roiled supply chains, and worker shortages are making it harder for airlines to fly at capacity and for hotels to rent out rooms. Russia’s invasion of Ukraine has disrupted gas and food supplies.

While economic policymakers initially hoped that the disruptions would fade and that prices would ease on their own, they have stopped waiting for that to happen — especially as price increases prove not only pronounced but also widespread, rising rapidly across an array of goods and services.