According to new data that was issued on Wednesday by the Bureau of Labor Statistics, inflation soared to a new pandemic-era peak in June in the United States, with consumer prices soaring by 9.1 percent month-over-month from the previous year.

This is the highest amount recorded in almost forty years, and it is also greater than the previous report, which indicated that prices had increased by 8.6 percent for the year that ended in May. According to Refinitiv, this number is also significantly greater than the 8.8 percent increase that economists had projected.

The US experienced a significant spike in its inflation rate.

When seasonal fluctuations were not taken into account, the Consumer Price Index showed a rise of 9.1 percent over the past year, which ended in June.

The overall costs that consumers pay for a variety of products and services increased by 1.3 percent from May to June, as demonstrated by the findings of the Consumer Price Index for June.

The surge in the price of gasoline, which was about 60 percent more than it was the previous year, was a primary factor in the increase that occurred in June. Last month, Americans were confronted with record-high gas prices, with the national average surpassing $5 per gallon across the country. The cost of electricity and natural gas both went up over the past year, with prices for the former increasing by 13.7% and prices for the latter increasing by 38.4% respectively. The price of energy as a whole increased by 41.6 percent as compared to the previous year.

However, the gains were noticed across the board in all of the categories. Over the past year, prices for food purchased at home increased by 12.2 percent, with the price of eggs increasing by 33.1 percent, butter increasing by 21.3 percent, milk increasing by 16.4 percent, chicken increasing by 18.6 percent, and coffee increasing by 15.8 percent. There was a 5.6 percent increase in the cost of housing.

Combating inflation should be considered “a top priority.”

Joe Biden, the Vice President, stated on Wednesday that the inflation number from the CPI for June was “unacceptably high.” However, he also observed that the reading is “also out of date,” given that gas prices had decreased in the past month. After reaching their all-time highs in June, the price of gasoline and crude oil has now fallen below $100 per barrel.

Biden stated that the price of energy alone was responsible for roughly half of the monthly increase in inflation. The figures from today do not represent the entire impact of roughly 30 days’ worth of drops in gas prices, which have resulted in a reduction of approximately 40 cents in the price at the pump since the middle of June. These cost-cutting measures are giving American households a much-needed pause for reflection. In addition, the price of wheat and other commodities has significantly decreased since the release of this study.

Additionally, Biden reaffirmed that combating inflation is his “top priority” in the economy.

According to Mark Zandi, chief economist of Moody’s Analytics, the typical American household now has to spend $493 more each month to acquire the same goods and services that they did during the same period last year.

In addition, as prices continue to go up, the gap between them and increases in wages is widening.

According to additional statistics from the BLS that was issued on Wednesday, real average hourly earnings, which show pay growth adjusted for inflation, declined by 1 percent from May to June and are down 3.6 percent from June 2021. These figures are based on an annual comparison.

The majority of the gains have been pretty well eaten away by inflation, according to Kathy Jones, managing director and chief fixed income strategist at Charles Schwab. The purchasing power of the general population is decreasing.

How this might affect future rate increases

Prices for the core consumer price index increased by 0.7 percent from May to June and by 5.9 percent for the 12-month period that ended in June. Food and energy prices, which tend to represent transitory variations, were stripped out of the calculation.

When judging future inflationary trends, the Federal Reserve pays particular attention to those core data, and the most recent numbers give the central bank likely the green light to continue with its aggressive sequence of rate hikes to cool off the economy and bring down higher prices. At the monetary policymaking meeting that will take place on July 26-27, it is widely anticipated that the Federal Reserve will raise its benchmark interest rate by at least 75 basis points.

Core inflation appears to have leveled off, and expectations are for it to continue to come down in the year-over-year comparison, according to Cailin Birch, the global economist at the Economist Intelligence Unit. However, it is too soon to say whether inflation has peaked (especially given the broader volatility within the global economy), but it is possible to say that inflation has reached its maximum level.

‘What everyone’s worried about is the inflation numbers for today or what happened yesterday, so to make decisions about the future, [the Fed is] having to work with information that looks backward,’ she added. “I believe that they are likely to conclude that the market needs reassurance that inflation expectations will be anchored.” This will likely result in larger interest rate hikes, but it will also increase the likelihood of a recession in the future.