Inflation reaches 9.1% in the United States

Inflation reaches 9.1% in the United States

UPDATE DAY

Prices soared again in June in the United States, with inflation reaching 9.1% and climbing to the highest since November 1981, which is increasing the pressure on Joe Biden, summoned to act to household purchasing power. 

This sharp increase, which threatens growth insofar as consumption is the main driver of the United States economy, weighs on the popularity of the Democratic president a few months before an important electoral deadline with the renewal of a large part of the elected members of Congress.

The consumer price index (CPI), which had already climbed 8.6% in May over one year, jumped in June even more than analysts expected.

Over one month, the increase amounted to 1.3% in June, against 1.0% in May.

Republicans reacted quickly on Twitter, with Senator Marco Rubio accusing, for example, the Democrats of “not caring about the things that matter to the average American.”

“This level of inflation is a direct result of Democratic spending since they took office” in Washington , attacked his colleague John Thune.

Joe Biden acknowledged in a statement that these figures were “too high” and recalled that the fight against inflation was his “priority”.

But, he immediately added as if to clear himself , they are “obsolete” because gasoline prices have been falling in recent weeks.

The average price per gallon (about 3.8 liters) in the United States has actually fallen back to about 4, $73 currently, after climbing above the symbolic $5 threshold for the first time in June.

This “should bring some respite to American families,” Biden said.

Consumers had accumulated significant savings during the Covid-19 pandemic, thanks in particular to substantial aid from the 'State and to expenses limited by containment measures and activity restrictions.

But the strong recovery in demand last year, combined with problems in supply chains, fueled high inflation, which worsened with the spike in energy prices triggered by Russia's invasion of China. Ukraine at the end of February.

The euro under the dollar

The rise in prices in June affected all sectors, specifies the Department of Labor in a statement. But the biggest contributors to this increase were housing, gasoline and food, expenses at the heart of daily life.

Energy prices in particular rose by 41.6% over one year, recording their strongest rise since April 1980.

As for food prices, they experienced their strongest increase since February 1981, up 10.4% year on year.

Excluding more volatile food and energy prices, so-called core inflation accelerated a little over a month, at +0.7% against +0.6% during the two previous months.

But it has calmed down over one year for the third month in a row, at +5.9% .

Among the few goods or services to have fallen were vacation rentals and plane tickets.

This small slowdown and the slight drop in prices at the pump should not, however, be enough to encourage the bank Fed) to ease its current policy.

The Fed began raising interest rates aggressively in March to curb demand and calm rising prices. It raised them again by three-quarters of a percentage point in June, its largest increase since 1994.

These rates, which set the tone for loans granted to individuals and businesses, are now in a range of between 1.50 and 1.75%.

For Ian Shepherdson of Pantheon Macroeconomics, inflation should continue to decline over the next few months, in particular due to lower wage increases, the decline in commodity prices and the rise of the dollar, which makes imports cheaper for Americans.

But the latest inflation numbers are “going to make the Fed very uncomfortable,” he predicts.

The central bank is expected to raise rates another three-quarters point when its next two meetings, in July and September, says Kathy Bostjancic of Oxford Economics.

This open door to an even stricter monetary policy in the United States caused the euro to plunge below the symbolic threshold of one dollar, which had not been crossed since December 2002.