Inflation Rises to 11.3% in Producer Index for June, Near Highest on Record

The comments below are an edited and abridged synopsis of an article by Zachary Halaschak

US inflation, as measured by producer wholesale prices, ticked up to 11.3% for the year ending in June, nearly the highest on record.

Inflation Rises to 11.3% in Producer Index for June, Near Highest on Record - BullionBuzz - Nick's Top Six
Rising food cost and grocery prices surging costs of supermarket groceries as an inflation financial crisis concept coming out of a paper bag shaped hit by a a finance graph arrow with 3D render elements.

Headline inflation, as measured by the Consumer Price Index, exploded to 9.1% for the 12 months ending in June, the highest level since 1981 and a bigger increase than expected.

These numbers are another indicator that prices are wildly out of control even as the Fed moves more aggressively to jack up interest rates to rein in America’s historic inflation.

“Despite a modest improvement in supply conditions, price pressures will remain uncomfortable in the near term and bolster the Fed’s resolve to prevent inflation from becoming entrenched in the economy,” economists said.

The high rate of inflation has politically damaged President Joe Biden and undercut support for spending proposals from the White House and congressional Democrats.

Last month, the Fed hiked its interest rate target by a three-quarters of a percentage point for the first time since 1994. It typically raises rates by a quarter of a percentage point, so the June hike was analogous to three simultaneous rate increases.

The Fed is set to meet again later this month, and it will likely raise its rate target by another 75 basis points, although some think that it could act more aggressively and raise interest rates by a full percentage point.

Atlanta Fed President Raphael Bostic said that “everything is in play,” including a full percentage point hike, after June’s CPI report.

There are fears that the Fed’s aggressive cycle of rate hiking will knock the economy into a recession, fears that worsen as inflation grows and the Fed keeps having to take a more hawkish approach to monetary policy.

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