WASHINGTON, June 10 (Reuters) – U.S. consumer price inflation accelerated in May as pump prices hit record highs and service charges rose, official statistics show. published on Friday, which could encourage the Federal Reserve to press ahead with the rise in its interest rates in the months to come.
The consumer price index (CPI) rose 1.0% last month after rising 0.3% in April, the Labor Department said. Over one year, it jumped 8.6%, after +8.3% the previous month.
Economists polled by Reuters on average forecast a 0.7% increase month-on-month and 8.3% year-on-year.
Gasoline prices hit around $4.37 per gallon (one gallon = approximately 3.78 litres) in May according to the AAA Automobile Association and were hovering around five dollars on Friday, suggesting the CPI should remain high in June.
The general surge in prices in the United States is also supported by the sharp rise in food prices, linked in part to the war in Ukraine, while the sanitary confinements in China continue to disrupt supply chains in many sectors. .
Some observers hoped that the exit from the COVID-19 crisis in the United States, by favoring a shift in spending from goods to services, would help curb the evolution of prices, but labor shortages, which are translate into wage increases, contribute to raising the prices of services, from real estate to restaurants and air transport.
FURTHER HALF POINT RATE HIKE EXPECTED
The basic price index (“core CPI”), which excludes those of energy and food products, for its part increased by 0.6% over one month as in April, and its increase over one year at 6.0% after +6.2% in April. The consensus gave it up 0.5% month-on-month and 5.9% year-on-year.
The figures published on Friday will obviously be taken into account by the Federal Reserve at its meeting next Tuesday and Wednesday, which should end according to the Reuters consensus with a further increase of half a percentage point in its key rate. And the markets expect the Fed to opt for an equivalent hike at the end of July.
The main risk, in the eyes of many economists and investors, is that this aggressive Fed policy aimed at reining in prices will end up stifling growth.
“Disposable income will decline and obviously that suggests a recession,” said Peter Cardillo, chief economist at Spartan Capital Securities, who predicts a drop in gross domestic product (GDP) from the fourth quarter of this year.
On the bond market, the yield on two-year US Treasury bills, the most sensitive to expectations of changes in key rates, rose by more than 10 basis points a few minutes after the publication of these figures, to 2.92%, while the dollar amplified its rise against other currencies, bringing the euro back below 1.0550 .
Wall Street then headed for an opening down more than 1% and European equities deepened their losses with a drop of nearly 2% for the broad Stoxx 600 index.
(Report Lucia Mutikani, French version Marc Angrand)