Gasoline prices soared in May, averaging around $4.37 a gallon, according to AAA data. Gasoline on Friday was close to $5 a gallon on Friday, indicating that the monthly CPI would remain elevated in June.
Inflation was also boosted last month by higher prices for other goods such as food, which soared after Russia’s war with Ukraine. China’s zero COVID-19 policy, which has dislocated supply chains, is also seen as keeping goods prices strong.
Prices for services such as rentals, hotel accommodation and air travel were also high last month. There was hope that the shift in spending from goods to services would help cool inflation. But a tight labor market is driving up wages, contributing to higher prices for services.
The inflation report was released ahead of a second anticipated 50 basis point rate hike by the Federal Reserve next Wednesday. The central bank is expected to raise its interest rate by an additional half percentage point in July. The Fed has raised the overnight rate by 75 basis points since March.
“Strong monthly inflation could suggest the Fed is guiding more explicitly that policy rates continue to rise by 50 basis points or more until actual inflation data convincingly accelerates,” said Veronica Clark, economist at Citigroup. In New York.
