The largest increase in energy, food, and monthly rents in decades… Gasoline 48.7%↑
Yeonjun, ‘Big Step’ is getting longer… Possibility of high-strength monetary tightening rises even following September
The U.S. consumer price index surpassed expectations, rewriting the record for the largest increase in more than 40 years.
The prospect of an increase in monetary tightening by the US central bank, the Federal Reserve (Fed), is bolstered by accelerating inflation in all directions, including energy, food, and monthly rent.
The U.S. Department of Labor announced on the 10th (local time) that the consumer price index (CPI) surged 8.6% in May from the same month a year earlier.
Not only did the increase increase from the previous month (8.3%), but it also recorded the largest increase since December 1981, surpassing March (8.5%).
The Wall Street Journal’s (WSJ) analysts’ forecast for May’s CPI growth was 8.3%.
It surged 1.0% from the previous month, significantly exceeding the increase of 0.3% in April and exceeding the market consensus of 0.7%.
Excluding energy and food, which has high volatility, the core CPI rose by 6.0% from the same month of the previous year and 0.6% from the previous month, respectively.
The rate of increase of core CPI from the same month of the previous year was slightly lower than in April (6.2%), but the rate of increase from the previous month was the same as in April.
Consumer prices rose sharply in all sectors last month.
Most of the daily necessities rose to double digits, breaking the record for the largest increase in decades.
According to the Ministry of Labor, energy soared 34.6% from the same month of the previous year, the largest increase since September 2005, of which gasoline soared 48.7% during the same period.
Gasoline prices are on the rise, setting record highs every day since June.
Food prices soared 11.9% in one year, the largest increase in 43 years since April 1979, and electricity prices also rose 12.0%.
Housing costs, which account for nearly a third of the total CPI, rose 5.5%.
This sharp increase in prices is likely to continue for the time being due to the shortage of raw materials such as energy and food due to the prolonged Russia-Ukraine war, China’s containment measures for the novel coronavirus infection (COVID-19), and the global supply chain twisted due to the global drought.
According to the CPI results in May, major New York stock indices fell by nearly 2% in following-hours trading, and the financial market is fluctuating, with the 10-year US Treasury yield rising.
The Fed, which had expected inflation to peak and stabilize downward, is likely to lean more toward continuing a large rate hike on the announcement that suggests prolonged inflation.
Some of the Fed, who predicted three consecutive ‘big steps’ (0.5 percentage point rate hike at a time) by July, argued that it was necessary to take a break from raising interest rates in September on the premise of price stability, but rather than that. Experts predicted that intensive monetary tightening is likely to continue following September.
Also, the evaluation that President Joe Biden and the ruling Democrats, whose approval ratings are bottoming out, are at a more disadvantageous position in the midterm elections in November due to inflationary pressures are predominant.
/yunhap news
