Consumer prices in the United States increased in May as gasoline prices reached a new high and the cost of services increased further, implying that the Federal Reserve may continue to raise interest rates by 50 basis points until September to combat inflation.
According to the Labor Department, the consumer price index rose 1.0 percent last month after rising 0.3 percent in April. Reuters polled economists, who predicted a 0.7 percent increase in the monthly CPI. According to AAA data, gasoline prices increased in May, averaging around $4.37 per gallon.
On Friday, they were flirting with $5 per gallon, indicating that the monthly CPI would remain elevated in June.
Inflation was also boosted last month by higher prices for other goods, such as food, which has risen in the aftermath of Russia’s unprovoked war against Ukraine. China’s zero COVID-19 policy, which has disrupted supply chains, is also seen as keeping goods prices high.
Rent, hotel accommodations, and airline travel were all expensive last month. There was hope that shifting spending from goods to services would help to reduce inflation. However, a tight labour market raises wages, which contributes to higher service prices.
The inflation report was released ahead of the Fed’s expected second 50 basis point rate hike next Wednesday. The Federal Reserve of the United States is expected to raise its policy interest rate by half a percentage point in July. Since March, it has raised the overnight rate by 75 basis points.
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