Gas prices, rents, and grocery bills shot up 9.1 percent in June, the fastest pace since 1981, as soaring gas prices and rising rents increased US household expenses. The Federal Reserve faces mounting problems due to the broad and rapid rise in prices.
Because prices at the pump have moderated in recent weeks, the inflation index, which includes food and gas, could slow down in July’s data. In the past month, the national average for unleaded gas reached about $5. As of this week, it was around $4.65.
There is a possibility that gas prices will rise again in the near future. Unwelcome news was included beyond the headlines in the report. According to an index that strips out food and fuel prices — which gives a sense of inflation trends — core inflation remained high and grew faster than economists expected. The core index rose 5.9 percent through June, barely slowing down from 6 percent a year earlier. There was a 0.7% increase in the core measure from May to June, which is worse news for central bankers than their previous monthly increase.
This deceleration is not certain to last, and it is unclear whether it will continue. Since the Coronavirus pandemic began, the global economy has been subjected to a series of macroeconomic shocks. Supply chains have been strained by factory shutdowns and shipping shortages, airline crew shortages are hampering flights and hotel reservations, and Russia’s invasion of Ukraine has disrupted oil and gas supplies while intensifying sanctions against Moscow. The inflation rate has been continuously rising for more than a year, and economists have struggled to predict its eventual decline.
With normalcy unlikely to return anytime soon, the Fed is no longer waiting for prices to stabilize and the economy to reach full employment and is potentially considering a large rate hike in an attempt to battle the soaring and unabated inflation. It is further feared that consumers and businesses may become accustomed to the high and stubborn inflation as long as it continues.
Moreover, geopolitics poses another potential wildcard: White House officials are worried about a possible increase in global energy prices caused by new European sanctions against Moscow meant to curb Russian oil flows by the end of the year.
Inflation is also under pressure from other factors. The cost of rent, for example, is a major component of household budgets and is rising quickly.
This is in addition to the cryptocurrency market, which is currently on a massive down curve exacerbated by the failures of centralized crypto lending exchanges defaulting on their own debts and subsequent liquidations.
Bitcoin price tumbled to $19,098 since the news, a drop of -3.44% as the inflation news hits media outlets across the globe.