Inflation rates are setting records escalating to over nine percent in the month of June, causing an increase in prices across the board. According to a report by PJ Media, Gas prices, rising rents, and swelling grocery bills have all seen massive increases as the inflation rate rises to its highest point since 1981.
The small decrease in gas costs was a welcome sight. The average price at the pump has dropped to $4.65 from above $5 a gallon at last month’s high. However, there is no assurance that prices won’t start to increase once more.
The report contained unwelcome news beyond the headline number. A core inflation index that strips out food and fuel prices — giving a sense of underlying inflation trends — remains high and came in faster than economists expected The core index climbed 5.9 percent the year through
June, barely a slowdown from 6 percent in the previous report. The core measure actually climbed 0.7 percent from May to June, more than the previous monthly increase and bad news for central bankers.
At the moment, employees are not demanding greater pay as a result of the high prices at the grocery store and the petrol station. However, there have already been a number of strikes, and a significant one involving train workers seems more possible every day.
Inflation will start to affect the economy in a way that producers, employees, and consumers all have to take into account when making purchases and selling their goods. More potent than anything Joe Biden and the Democrats can achieve is this psychological threat.
Given the threat, the central bank has been escalating its assault on inflation. The Fed first lifted interest rates from near zero in March, by a quarter point, to try to make money expensive to borrow and slow consumer demand. In May, it raised rates half a point, and last month, it increased them by 0.75 percentage points.
Many central bankers have been clear that they want to make another 0.75-point increase in July, and that they hope to raise rates into the neighborhood of 3.5 percent by the end of the year. They could achieve that by raising rates half a point in September and a quarter point in both November and December.
When borrowing costs rise, businesses begin to seriously cut their budgets. As one of the few things a firm has control over, this implies reducing labor costs. Economists from Bank of America have changed their recession predictions and now suspect a “mild recession” in 2022, citing the excessive inflammation and decreasing consumer spending.