Surging gas prices drove the rate of inflation to 9.1%. By raising rates, the Fed aims to cool off the economy just enough to bring down inflation, ideally without triggering a recession. Yet many economists are doubtful they can succeed.
The numbers: Surging gasoline prices last month drove the rate of U.S. inflation to a nearly 41-year peak of 9.1%, offering little hope of help soon for Americans suffering from a high cost of living.
Higher prices of everything ranging from fuel to food to rent is expected to prod the Federal Reserve to sharply raise a key U.S. interest rate again when senior officials meet toward the end of this month. The Fed views the core rate as a more accurate measure of future inflation trends because gas and food prices tend to go up and down quickly and usually don’t stay high for very long. Indeed, gas prices have fallen sharply in the past month.
Unless inflation relents soon, the Fed will keep jacking up interest rates. If rates go high enough, they’ll slow the economy and even put the U.S. at the risk of a second recession in three years. The good news? Oil prices have fallen sharply to around $96 a barrel from as high as $122 in early June. Prices at the gas pump, though still high, are also falling.
Prices also rose last month for new and used vehicles, auto insurance, clothing, household furnishings and medical care.Inflation-adjusted wages, meanwhile, sank by 1% in June.
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