U.S. inflation in May recorded a surprising figure when it rose by 8.6% from a year ago and it was the fastest increase since December 1981 according to a report by the Bureau of Labor Statistics on Friday.
The consumer price index, a measure of the prices of goods and services, rose more than the Dow Jones estimate which targeted a reading of only %. The Core Consumer Price Index (CPI/core CPI) which does not take into account food and energy prices rose 6%, slightly higher than the estimated 5.9%.
On a monthly basis, CPI increased 1% per month while core CPI increased 0.6%, compared to estimates of 0.7% and 0.5% respectively. Soaring prices of housing, petrol and food have contributed to the increase.
Energy prices generally rose 3.9% from a month ago, making an increase of 34.6%. In that category, fuel oil registered a monthly increase of 16.9%, pushing a 12 -month jump to 106.7%.
Shelter costs, on the other hand, accounted for about a weighted third of the CPI/CPI, increasing 0.6% for May and now 5.5% higher than last year. Food costs rose another 1.2% in May, bringing the year -on -year gain to 10.1%.
The market reacted negatively to this report with the stock futures market showing a sharply lower opening on Wall Street and government bond yields rising. The US dollar index strengthened 0.67% to trade level of 103.907 after the report.
Friday’s figures shattered market hopes that inflation would subside and was compounded by concerns that the U.S. economy. approaching recession.
The May report is likely to strengthen the possibility of a 50 basis point double interest rate hike. The Fed is expected to continue tightening policy tightening throughout the year and possibly into 2023. The central bank’s benchmark short -term lending rate is currently anchored around 0.75% -1% and is expected to rise to 2.75% -3% by year -end, according to CME estimates.
