WASHINGTON—U.S. consumer prices rose by the most in 13 years in June amid supply constraints and a continued rebound in the costs of travel-related services from pandemic-depressed levels as the economic recovery gathered momentum.
The consumer price index increased 0.9 percent last month, the largest gain since June 2008, after advancing 0.6 percent in May, the Labor Department said on Tuesday.
In the 12 months through June, the CPI jumped 5.4 percent. That was the largest gain since August 2008 and followed a 5.0 percent increase in the 12 months through May. Excluding the volatile food and energy components, the CPI accelerated 0.9 percent after increasing 0.7 percent in May.
The so-called core CPI surged 4.5 percent on a year-on-year basis, the largest increase since November 1991, after rising 3.8 percent in May. Annual inflation rates have been boosted by the dropping of last spring’s weak readings from the CPI calculation. These so-called base effects are leveling off.
Economists polled by Reuters had forecast the overall CPI would climb 0.5 percent and the core CPI would rise 0.4 percent.
COVID-19 vaccinations, low interest rates, and nearly $6 trillion in government relief since the pandemic started in the United States in March 2020 are fueling demand, straining the supply chain, and raising prices across the economy.
A global semiconductor shortage has undercut motor vehicle production, pushing up prices of used cars and trucks—the major driver of inflation in recent months.
With nearly 160 million Americans immunized, demand for airline travel and accommodations is picking up, also fanning price pressures.
Inflation is expected to remain elevated through part of 2022, as prices for many travel-related services are still below pre-pandemic levels.
Federal Reserve Chair Jerome Powell has repeatedly stated that higher inflation will be transitory, noting that he expected supply chains to normalize and adapt. Treasury Secretary Janet Yellen shares that view.
Minutes of the U.S. central bank’s June 15-16 policy meeting published last week showed “a substantial majority” of officials saw inflation risks “tilted to the upside,” and the Fed as a whole felt it needed to be prepared to act if those risks materialized.
The Fed slashed its benchmark overnight interest rate to near zero last year and is pumping money into the economy through monthly bond purchases. It has signaled it could tolerate higher inflation for some time to offset years in which inflation was lodged below its 2 percent target, a flexible average.
The Fed’s preferred inflation measure, the core personal consumption expenditures price index, jumped 3.4 percent in May, the largest gain since April 1992.