U.S. inflation surged to a new four-decade high in June because of rising prices for gas, food and rent, squeezing household budgets and pressuring the Federal Reserve to raise interest rates aggressively -- trends that raise the risk of a recession.
Dire data: The government’s consumer price index soared 9.1% over the past year, the biggest yearly increase since 1981, with nearly half of the increase due to higher energy costs. With the cost of many goods and services rising faster than average incomes, a vast majority of Americans are feeling the pinch in their daily routines.
What’s next: The Federal Reserve is engaged in the fastest series of interest rate hikes in three decades, which it hopes will cool inflation by tamping down borrowing and spending by consumers and businesses.
They said it: “The Fed’s rate hikes are doing what they are supposed to do, which is kill off demand,” said Megan Greene, global chief economist at the Kroll Institute. “The trick is if they kill off too much and we get a recession.”
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