CPI soars at the fastest rate since annual inflation peaked at 9.1% in June 2022
Tiana Lowe Doescher
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An 11% increase in gas prices in August fueled a chilling surge in consumer price index inflation, which rose to 3.7% for the year ending last month. That’s up from 3.2% in July and nearly twice the Federal Reserve‘s maximum inflation target of just 2% annually.
Between August’s CPI print and core PCE inflation increasing in July for the first time since January, there’s no doubt about it: The worst inflation crisis in 40 years, which seemed to be abating earlier in the summer, is heating up again.
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Overall average prices have already increased by 16% since President Joe Biden took office, but the disproportionate growth in essentials, which comprise a greater share of budgets for lower-income households, has meant the least privileged have paid the highest burden. For example, the consumer price index specifically for food is up 19% since January 2021, and electricity prices are up 23%. In the last month alone, food and electricity prices increased by 0.2%. Shelter prices, which increased by 0.3% last month and more than 7% over the past year, have also been a major driver of inflation’s resurgence.
But the most ominous finding in this latest release from the Bureau of Labor Statistics is that headline CPI rose by more than 0.6% last month. That’s the fastest single-month increase since June of last year, when the annual measure peaked at 9.1%. A 0.6% monthly increase translates to a 7.2% annualized rate, or nearly four times what the Fed considers acceptable.
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Defenders of “Bidenomics” will point out that core CPI, which excludes the volatile categories of food and energy prices, has trended downward in the past three months. But core CPI still came in higher than expectations for the month, with the annual rate at 4.3% in August. Further, the Fed’s preferred core inflation measure of core PCE accelerated to 4.7% in July from 4.1% in June.
Mortgages have already crossed the crucial 7% threshold for a 30-year fixed rate. Thanks to inflation numbers such as these, another rate hike is more likely to come from the central bank later this year.