Beautiful Virgin Islands

Wednesday, Jul 16, 2025

U.S. annual consumer inflation posts largest increase since 1981

U.S. annual consumer inflation posts largest increase since 1981

U.S. annual consumer prices jumped 9.1% in June, the largest increase in more than four decades, leaving Americans to dig deeper to pay for gasoline, food, healthcare and rents, and the Federal Reserve most certain to hike interest rates by another 75 basis points at the end of the month.

The bigger-than-expected rise in the year-on-year consumer price index reported by the Labor Department on Wednesday also reflected higher prices for a range of other goods and services, including motor vehicles, apparel and household furniture. The CPI increased by the most in nearly 17 years on a monthly basis.

The inflation data followed stronger-than-expected job growth in June and suggested that the U.S. central bank's aggressive monetary policy stance had made little progress thus far in cooling demand and bringing inflation down to its 2% target. With rents surging by the most in 36 years, inflation could become entrenched.

Though a global problem, stubbornly high inflation is a political risk for U.S. President Joe Biden and his Democratic Party heading into congressional elections in November.

"Despite the Fed's best intentions, the economy looks to be moving into a higher inflation regime," said Christopher Rupkey, chief economist at FWDBONDS in New York. "The Fed is even further behind the curve after today's sizzling report."

The consumer price index increased 1.3% last month, the biggest monthly gain since September 2005, after advancing 1.0% in May. A 7.5% surge in energy prices accounted for nearly half of the increase in the CPI. Gasoline prices jumped 11.2% after rebounding by 4.1% in May. Prices at the pump have since declined considerably from June's record highs.

Natural gas prices rose 8.2%, the most since October 2005. The cost of food consumed at home rose 1.0%, posting the sixth straight monthly increase of at least 1.0%.

In the 12 months through June, the CPI jumped 9.1%. That was the biggest gain since November 1981 and followed an 8.6% rise in May. Economists polled by Reuters had forecast the CPI would rise 1.1% and accelerating 8.8% year-on-year.

Consumer prices are surging, driven by snarled global supply chains and massive fiscal stimulus from governments early in the COVID-19 pandemic.

The ongoing war in Ukraine, which has caused a spike in global food and fuel prices, has worsened the situation.

President Biden sought to draw some comfort from the retreat in gasoline prices from June, when they averaged above $5 per gallon, according to data from motorist advocacy group AAA. They were averaging $4.631 per gallon on Wednesday, which could ease some of the pressure on consumers.

"Those savings are providing important breathing room for American families," Biden said in a statement. "And, other commodities like wheat have fallen sharply since this report."

Annual food prices are rising at their fastest pace since February 1981, with energy prices posting their largest jump in more than 42 years.

Financial markets overwhelmingly expect the Fed to raise its policy rate by 75 basis points at its July 26-27 meeting. A full-percentage-point increase has not been ruled out and attention now shifts to the University of Michigan's consumer inflation expectations survey on Friday.

The Bank of Canada surprised by hiking its policy rate by 100 basis points on Wednesday, a super-sized increase last seen in 1998.

The Fed has raised its overnight interest rate by 150 basis points since March.

U.S. stocks were mixed. The dollar fell against a basket of currencies. U.S. Treasury prices rose.

UNDERLYING INFLATION


The economy created 372,000 jobs in June, with a broader measure of unemployment hitting a record low.

There had been hope that a shift in spending from goods to services would help cool inflation. But the very tight labor market is boosting wages, adding to higher prices for services.

Underlying inflation pressures sizzled last month. Excluding the volatile food and energy components, the CPI gained 0.7% in June after climbing 0.6% in May. The so-called core CPI was lifted by the cost of rent, which shot up 0.8%, the largest monthly increase since April 1986.

Rents are one of the largest and stickiest inflation categories, which raises the risk of the Fed maintaining its aggressive rate hikes into the second-half of the year.

"There remain miles to go before getting back toward anything resembling price stability," said Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina.

New vehicle prices maintained their upward trend as did those for used cars and trucks. The cost of motor vehicle maintenance and repairs surged 2.0%, the most since September 1974. Healthcare costs rose 0.7%, with a record increase in the cost of dental services.

Apparel prices increased 0.8%, despite retailers like Walmart (WMT.N) and Target (TGT.N) reporting excess inventory that would require discounts. But prices for hotels, car rentals and airfares declined. Still, core goods prices rose a strong 0.8%, while services gained 0.7%.

The core CPI increased 5.9% in the 12 months through June. That followed a 6.0% rise in the 12 months through May and marked a third straight month of deceleration.

High inflation is eroding wage gains, which together with rising borrowing costs could crimp consumer spending, leaving economists to expect a mild recession at the turn of the year. Inflation-adjusted average weekly earning fell 1.0% in June.

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Dimon Warns on Fed Independence as Trump Administration Eyes Powell’s Succession
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Jeff Bezos Considers Purchasing Condé Nast as a Wedding Gift
Ghislaine Maxwell Says She’s Ready to Testify Before Congress on Epstein’s Criminal Empire
Bal des Pompiers: A Celebration of Community and Firefighter Culture in France
FBI Chief Kash Patel Denies Resignation Speculations Amid Epstein List Controversy
Air India Pilot’s Mental Health Records Under Scrutiny
Google Secures Windsurf AI Coding Team in $2.4 Billion Licence Deal
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
South African Police Minister Suspended Amid Organised Crime Allegations
Nvidia CEO Claims Chinese Military Reluctance to Use US AI Technology
Hong Kong Advances Digital Asset Strategy to Address Economic Challenges
Australia Rules Out Pre‑commitment of Troops, Reinforces Defence Posture Amid US‑China Tensions
Martha Wells Says Humanity Still Far from True Artificial Intelligence
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
U.S. Resumes Deportations to Third Countries After Supreme Court Ruling
Excavation Begins at Site of Mass Grave for Children at Former Irish Institution
Iranian President Reportedly Injured During Israeli Strike on Secret Facility
EU Delays Retaliatory Tariffs Amid New U.S. Threats on Imports
Trump Defends Attorney General Pam Bondi Amid Epstein Memo Backlash
Renault Shares Drop as CEO Luca de Meo Announces Departure Amid Reports of Move to Kering
Senior Aides for King Charles and Prince Harry Hold Secret Peace Summit
Anti‑Semitism ‘Normalised’ in Middle‑Class Britain, Says Commission Co‑Chair
King Charles Meets David Beckham at Chelsea Flower Show
If the Department is Really About Justice: Ghislaine Maxwell Should Be Freed Now
NYC Candidate Zohran Mamdani’s ‘Antifada’ Remarks Spark National Debate on Political Language and Economic Policy
President Trump Visits Flood-Ravaged Texas, Praises Community Strength and First Responders
From Mystery to Meltdown, Crisis Within the Trump Administration: Epstein Files Ignite A Deepening Rift at the Highest Levels of Government Reveals Chaos, Leaks, and Growing MAGA Backlash
Trump Slams Putin Over War Death Toll, Teases Major Russia Announcement
Reparations argument crushed
Rainmaker CEO Says Cloud Seeding Paused Before Deadly Texas Floods
A 92-year-old woman, who felt she doesn't belong in a nursing home, escaped the death-camp by climbing a gate nearly 8 ft tall
French Journalist Acquitted in Controversial Case Involving Brigitte Macron
Elon Musk’s xAI Targets $200 Billion Valuation in New Fundraising Round
Kraft Heinz Considers Splitting Off Grocery Division Amid Strategic Review
Trump Proposes Supplying Arms to Ukraine Through NATO Allies
EU Proposes New Tax on Large Companies to Boost Budget
Trump Imposes 35% Tariffs on Canadian Imports Amid Trade Tensions
Junior Doctors in the UK Prepare for Five-Day Strike Over Pay Disputes
US Opens First Rare Earth Mine in Over 70 Years in Wyoming
Kurdistan Workers Party Takes Symbolic Step Towards Peace in Northern Iraq
Bitcoin Reaches New Milestone of $116,000
Biden’s Doctor Pleads the Fifth to Avoid Self-Incrimination on President’s Medical Fitness
Grok Chatbot Faces International Backlash for Antisemitic Content
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
×