Washington DC: U.S. inflation surged to a new four-decade high in June because of rising prices for gas, food, and rent, squeezing household budgets and pressuring the Federal Reserve to raise interest rates aggressively – trends that increase the risk of a recession.
The government’s consumer price index soared 9.1 percent over the past year, the biggest yearly increase since 1981, with nearly half of the increase due to higher energy costs.
Lower-income and Black and Hispanic Americans have been hit especially hard since a disproportionate share of their income goes toward essentials such as transportation, housing, and food. But with the cost of many goods and services rising faster than average incomes, a vast majority of Americans are feeling the pinch in their daily routines.
For 72-year-old Marcia Freeman, who is retired and lives off of a pension, there is no escape from rising expenses. “Everything goes up, including cheaper items like store brands,” said Freeman, who visited a food bank near Atlanta this week to try and gain control of her grocery costs. Grocery prices have jumped 12 percent in the past year, the steepest climb since 1979.
The Fed is already engaged in the fastest series of interest rate hikes in three decades, hoping it will cool inflation by tamping down borrowing and spending by consumers and businesses. The U.S. economy shrank in the first three months of the year, and many analysts believe the trend continued in the second quarter.
