Fed In a Tight Spot After CPI Numbers Show Inflationary Pressure Is Still Broad-based Array ( [cookie] => be995b-2c0bd7-e45201-bab06a-7ad9c7 [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 1 [max_usage_crypto] => 1 [lock] => 1 [message] => [error] => [active_member] => 1 [subscriber] => 0 [role] => fsi_macro [visitor_id] => 593924 [reason] => [method] => ) 1
The May consumer price index report came in hotter than feared, with prices rising 8.6% year over year, the highest level since 1981. The increase marks a re-acceleration of inflation that makes it more difficult for consumers to afford everyday purchases at the grocery store and gas pump. It also poses a challenge for the Federal Reserve as it tries to secure a strong economy. CPI was 6% when excluding food and surging energy prices. Economists were looking for 8.3% for the main index and 5.9% for the core. There is plenty of debate on why inflation is occurring. Is it undisciplined monetary and fiscal policy? Is it supply chain disruptions? Is it the Russia-Ukraine conflict? The economy is a complex machine, and each situation plays a role.
The Consumer Price Index climbed 1 percent from April – far more quickly than in the previous month – and by 0.6 percent after stripping out food and fuel prices. The headline inflation rate was the fastest since late 1981, nearly 41 years ago, as items such as rents, gas, used cars, and food have become sharply more expensive. The cost of eating food at home has increased 11.9% over the last 12 months. Gasoline is up nearly 50% in the same time frame.
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Thomas J. Lee
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