US Inflation Hits 9.1% on Soaring Gas Prices, Sky-High CPI to Embolden Fed Hawks

[MongiIG]

Jul 13, 2022 | DailyFX
Diego Colman, Market Analyst

US INFLATION DATA KEY POINTS:

• June U.S. inflation spikes 1.3% on a seasonally adjusted basis and 9.1% over the last 12 months, well above expectations
• Core CPI rises 0.7% m-o-m and 5.9% y-o-y, also above estimates
• Unrelenting inflationary pressures will likely seal the deal for another 75 basis points hike at the July FOMC meeting

Inflationary pressures remained scorching hot last month amid soaring energy costs in the U.S. economy, giving the Federal Reserve cover to continue front-loading interest rate increases during the battle to restore price stability, a process that is sure to be protracted and bumpy considering the current state of affairs.

According to the U.S. Bureau of Labor Statistics, CPI, which measures the overall level of prices of a representative basket of goods and services purchased by Americans, soared 1.3% on a seasonally adjusted basis and 9.1% from a year earlier in June, topping estimates in both cases. Analysts surveyed by Bloomberg News had expected the headline gauge to rise 1.1% m-o-m and 8.8% y-o-y.

JUNE INFLATION

Source: BLS

The annual inflation rate marked a new cycle high, quickening to the fastest pace since November 1981, nearly five times above the Fed’s symmetric 2% target, a situation that undoubtedly warrants raising borrowing costs above the neutral level and into restrictive territory expeditiously to prevent second-order effects from cascading and increasing risks to the outlook.