US consumer prices rise in June

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People wearing protective masks shop in Macy’s Herald Square after the coronavirus disease (COVID-19) outbreak in the Manhattan neighborhood of New York City, New York, United States, December 26, 2020. REUTERS / Jeenah Moon / File Photo

WASHINGTON, July 13 (Reuters) – Consumer prices in the United States rose the most in 13 years in June due to supply constraints and a continued rebound in the costs of travel-related services from levels depressed by the pandemic as the economic recovery gained momentum.

The consumer price index rose 0.9% last month, the largest increase since June 2008, after advancing 0.6% in May, the Labor Department said on Tuesday.

In the 12 months to June, the CPI jumped 5.4%. This is the largest gain since August 2008 and follows a 5.0% increase in the 12 months to May. Excluding the volatile components of food and energy, the CPI accelerated 0.9% after increasing 0.7% in May.

The core CPI jumped 4.5% year-on-year, the largest increase since November 1991, after rising 3.8% in May. Annual inflation rates were boosted by lower readings last spring of the CPI calculation. These so-called base effects stabilize.

Economists polled by Reuters had forecast that the headline CPI would rise 0.5% and the core CPI would rise 0.4%.

COVID-19 vaccinations, low interest rates and nearly $ 6 trillion in government assistance since the start of the pandemic in the United States in March 2020 are fueling demand, putting supply chain at risk strain and increase prices throughout the economy.

A global semiconductor shortage has sapped motor vehicle production, pushing up prices for used cars and trucks – the main driver of inflation in recent months.

With nearly 160 million Americans immune, demand for air travel, hotels and motels is accelerating, also fueling price pressures. However, parts of the United States with low vaccination rates are experiencing an increase in infections with the Delta coronavirus variant, which could slow economic activity. These fears pushed down US Treasury yields last week.

While inflation has likely peaked, it is expected to remain high until part of 2022, as prices for many travel-related services are still below pre-pandemic levels.

“The pace of economic recovery may slow down a bit in the coming months and inflation may subside from very high levels recently,” said David Kelly, chief global strategist at JPMorgan Funds in New York. “However, the economy still appears poised for a very full recovery in the coming months, with abundant excess demand to support higher inflation.”

Federal Reserve Chairman Jerome Powell has repeatedly said that higher inflation will be transient, noting that he expects supply chains to normalize and adapt. Treasury Secretary Janet Yellen shares this view.

The minutes of the US central bank’s June 15-16 policy meeting released last week showed that a “substantial majority” of officials saw inflation risks “tilting up,” and The Fed as a whole felt it had to be prepared to act if these risks materialized. Read more

The Fed cut its overnight key rate to near zero last year and is pumping money into the economy through monthly bond purchases. He indicated that he could tolerate higher inflation for a period of time to compensate for years in which inflation has remained below its target of 2%, a flexible average.

The Fed’s preferred measure of inflation, the basic personal consumption expenditure price index, jumped 3.4% in May, the largest gain since April 1992.

Reporting by Lucia Mutikani Editing by Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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