US inflation hits 9.1% in June, highest in 40 years

US inflation surged
in June more than analysts’ expectations, highlighting relentless price
pressures that keep the Federal Reserve on track for another
big interest-rate hike later this month. The consumer price index increased to 9.1% in June from a year earlier, the
largest gain since the end of 1981, Labor Department data showed Wednesday. The
widely followed inflation metric rose 1.3% from a month earlier, the highest
since 2005, reflecting higher gasoline prices, food and shelter costs. 

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Economists had projected a 1.1% rise from May and an 8.8%
year-over-year increase, according to the Bloomberg survey medians.

The core CPI, which strips out the more volatile food and energy
components, increased 0.7% from the previous month and 5.9% from the year-ago
period.

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Treasury yields and the dollar surged while the US stock futures
fell following the report.

“The remarkable extent of the move leaves market participants with
the question: how much longer, and how much further can this go?” said Stephen
Gallo, European head of foreign-exchange strategy for BMO Capital Markets.

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The red-hot inflation data shows that the price pressures are
rampant and widespread throughout the economy and continue to affect investors’
purchasing power and confidence.

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According to several economists, this data will be the peak in the
current inflationary cycle. Various factors such as housing stand to keep price
pressures elevated for longer. Geopolitical crisis including Russia’s war
in Ukraine and Covid lockdowns in China also pose risks to supply chains and
the inflation outlook.

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The Fed officials have already signaled a second 75 basis-point
hike in interest rates later this month amid persistent inflation and strong
job and wage growth. Even before the figures were released, traders had already
forecasted a three-quarter percentage-point hike for July.