Customers pass by advertisements for Costco services at a Costco store in Mountain View, Calif., Wednesday, Dec. 12, 2007. (AP Photo/Paul Sakuma)
The U.S. has been reeling from high inflation since last year, but now the core consumer price index (CPI) has reached levels even some financial experts didn’t anticipate. The CPI hit 8.6 percent in May, marking the fastest pace since December 1981, The Wall Street Journal reported.
The increased costs of goods and services across the board are driving the highest inflation levels in over 40 years. More specifically, rising gas, food, energy and housing costs caused by supply shortages, the Russian invasion of Ukraine and other factors have contributed to double-digit percentage rate hikes.
“Inflationary pressures were seen nearly everywhere,” Wells Fargo senior economist Sarah House told WSJ. “Given everything from the implications of the Russian invasion of Ukraine, the Chinese lockdowns and just the sheer appetite for travel…what we’ve seen is the perfect storm of those factors hitting, along with some major refinery closures.”
House added inflation rates are expected to continue rising, despite the Federal Reserve’s attempts to calm the economy. “We suspect that the formidable momentum in inflation could push the headline rate for CPI close to 9% as early as next month,” House said.
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Americans receiving higher wages, an increase in traveling and worker shortages that make it difficult for employers to cut costs are also driving inflation.
Though the economy rebounded in 2021, it led to supply chain shortages as the market struggled to keep up with increased demand. Add to that the skyrocketing costs of rents and mortgages, which are up 15.6 percent according to Charlie Bilello, founder and CEO of Compound Capital Advisors and the situation looks bleaker.
James Knightley, the chief international economist at ING, said, “The breadth of inflation pressures in the economy should alarm the Fed.”
Skyrocketing costs are disproportionately impacting families with no discretionary income, many of whom are Black Americans, who are trying to secure the basic necessities to live, said Paul Ashworth, chief North America economist at Capital Economics.
“For people on lower incomes this is not discretionary spending,” Mr. Ashworth said. “Other than substituting out cheaper food types—cheaper meat cuts, whatever it might be—people need to continue buying food.”
For inflation to ease, demand hmust come down Knightley said. “To get demand into better balance with the supply the onus is on the Federal Reserve to do the heavy lifting,” Knightley told WSJ.
PHOTO: Customers pass by advertisements for Costco services at a Costco store in Mountain View, Calif., Wednesday, Dec. 12, 2007. (AP Photo/Paul Sakuma)
