Soaring gasoline and food prices boost U.S. consumer inflation in May


WASHINGTON, June 10 (Reuters) – U.S. consumer prices accelerated in May as gasoline prices hit a record high and the cost of services rose further, suggesting the Federal Reserve could continue its interest rate hikes of 50 basis points until September to fight inflation.

The consumer price index rose 1.0% last month after gaining 0.3% in April, the Labor Department said Friday. Economists polled by Reuters had forecast the monthly CPI to rise 0.7%. Gasoline prices soared in May, averaging around $4.37 a gallon, according to AAA data.

They were flirting with $5 a gallon on Friday, indicating that the monthly CPI will remain high in June.

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Inflation was also boosted last month by higher prices for other goods like food, which surged following Russia’s unprovoked war on Ukraine. China’s zero COVID-19 policy, which has disrupted supply chains, also appears to be keeping commodity prices high.

Prices for services like rent, hotel accommodation and air travel were also high last month. It had been hoped that shifting spending from goods to services would help curb inflation. But a tight labor market is driving up wages, contributing to higher prices for services.

The inflation report was released ahead of an anticipated second rate hike of 50 basis points from the Fed next Wednesday. The US central bank is expected to raise its key rate by an additional half point in July. It has raised the policy rate by 75 basis points since March.

“Continued strong monthly inflation may suggest the Fed is guiding policy rates more explicitly by continuing to hike 50 basis points or more until realized inflation data convincingly slows,” Veronica Clark said. , an economist at Citigroup in New York.

In the 12 months to May, the CPI rose 8.6% after rising 8.3% in April. Economists had hoped the annual CPI rate would peak in April.

Core inflation was just as strong last month as rents and airfares continued to rise.

Excluding the volatile food and energy components, the CPI rose 0.6% after rising by the same margin in April.

The so-called core CPI rose 6.0% in the 12 months to May. This followed a 6.2% rise in April. Inflation, by all measures, was well above the Fed’s 2% target.

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Reporting by Lucia Mutikani Editing by Chizu Nomiyama

Our standards: The Thomson Reuters Trust Principles.


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