Inflation surged in June to a new 40-year high, marking the fifth time it's broken that record this year. The only exception was in April, when it eased slightly.
The Consumer Price Index (CPI) increased by 9.1% annually in June, hitting its highest point since November 1981, according to the Bureau of Labor Statistics (BLS). This is up from May’s annual increase of 8.6%. On a monthly basis, inflation jumped 1.3% from May to June.
The greatest drivers of inflation last month were rising prices for gas, rent and food, according to the report. The energy index increased 7.5% month-over-month and contributed to nearly half of the increase, while the gasoline index rose 11.2%. The food index increased by 1% in June. And the cost of used cars, as well as motor vehicle repair, also surged.
"There are signs that some of the main drivers of inflation are easing, such as lower oil and other commodity prices in July, slower wage growth, and declining supply chain pressures," Dawit Kebede, Credit Union National Association (CUNA) senior economist, said in a statement. "However, service price increases led by housing and pent-up demand for vehicles will keep inflation elevated in the coming months."
If you are struggling financially amid rising inflation, one way to potentially offset costs is by shopping for new auto insurance. You can visit Credible to compare your options and choose the best rate for you.
Inflation could worsen the economy in a declining jobs market, economist says
Many companies have recently begun to curb their hiring as recession risks grow. For example, Google announced it will slow its hiring for the rest of this year, saying the "uncertain global economic outlook has been top of mind."
"Inflation combined with deteriorating business conditions is squeezing workers’ wallets," Morning Consult Chief Economist John Leer said in a statement following the June inflation report. "Wages are not keeping pace with inflation, with real average hourly earnings falling 1.3% in June.
"Unlike last year when we had high inflation paired with a high demand for workers, businesses are currently less willing to raise wages in line with inflation given mounting concerns about a recession," Leer said. "Going forward, negative real wage growth will erode consumers’ purchasing power and exert additional pressure on personal finances."
If you are trying to reduce your monthly expenses amid today’s rising inflation, you could consider using a personal loan to help you pay down outstanding debt. Visit Credible to compare multiple personal loan lenders at once and find the one with the best interest rate for you.
Fed to continue raising interest rates
The Federal Reserve recently released the minutes from its June meeting, showing that another 75-basis point rate hike could be on the table at its next Federal Open Market Committee (FOMC) meeting in July.
Economists confirmed that June’s high inflation will likely push the Fed to continue raising interest rates in an attempt to bring prices back down.
"There is a higher chance that the Federal Reserve will raise interest rates by 75 basis points if not more by the end of the month given a strong jobs report, broad-based price increases, and elevated inflation expectation.," Kebede said in a statement.
In June, the Fed raised rates by 75 basis points, the highest increase since 1994. This was the third interest rate hike of 2022 and pushed the federal funds target range to 1.5% to 1.75%. Now, one economist agreed that another 75-basis point rate hike is nearly guaranteed.
"The accelerating inflation means there’s a lot more work for the Federal Reserve to do," First American Chief Economist Mark Fleming said in a statement. "Another 75-point increase in the federal funds rate is almost assured."
If you want to take advantage of interest rates before they increase, you could consider refinancing your mortgage to help lower your monthly payment. To see if this is the right option for you, contact Credible to speak to a home loan expert and get all of your questions answered.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at firstname.lastname@example.org and your question might be answered by Credible in our Money Expert column.