The United States is experiencing one of the highest inflation rates among developed countries, with the federal government reporting on Tuesday that inflation climbed to a 41-year high of 9.1 percent last month.
The consumer price index, a broad measure of goods and services in the nation, soared above the 8.8 percent Dow Jones estimate, with Moody’s Analytics Senior Economist Ryan Sweet calculating that the average American family coughed up an extra $493 last month, according to the New York Post.
President Joe Biden has tried to reassure Americans that the United States is ‘in a stronger position than any other in the world to overcome this inflation.’
But the US is now on par with the United Kingdom, where government officials reported that inflation soared 9.1 percent in June – the highest level there in four decades – due to rising energy, fuel and grain costs as the war in Ukraine continues.
Gas and electricity prices jumped by 53.5 and 95.5 percent in the country over last year, the BBC reports.
THE US AND UK HAVE THE HIGHEST RATE OF INFLATION AMONG G7 COUNTRIES
Of the world’s major economies, the US and UK are tied for the sixth highest inflation rate – behind Turkey, Russia, Poland and Spain. But they have the highest rate amongh G7 countries.
United States – 9.1%
United Kingdom – 9.1%
Canada – 7.7%
Germany – 7.4%
Italy – 6%
France – 4.8%
In comparison, Russia’s inflation spiked after it invaded Ukraine, and in African countries the rate also grew.
Lebanon – 211%
Zimbabwe – 192%
Russia – 15.9%
Nigeria – 16.8%
Brazil – 2.1%
Netherlands – 9.6%
Spain – 8.3%
India – 7.8%
Mexico – 7.9%
South Africa – 5.9%
South Korea – 4.8%
Indonesia – 3.5%
Switzerland – 2.5%
Saudi Arabia – 2.3%
China – 2.5%
Source: Institute of Chartered Accountants
Of the world’s major economies, the US and UK are tied for the sixth highest inflation rate – behind Turkey, Russia, Poland and Spain, according to international market watcher Trading Economies.
In the 19 European countries that use the euro currency, inflation hit 8.1 percent that month, from a year earlier, the most on record dating back to 1997.
Canada’s inflation rate currently sits at 7.7 percent, with Japan at only 2.1 percent in May – its highest in years as food prices rose while wages remained stagnant, according to Reuters – and China’s inflation rate hitting 2.5 percent in June.
Nearby Mexico also saw prices rise 7.9 percent in June, and Israel saw prices jump 4.1 percent over last year.
Still, the United States remains ahead of some developing countries.
The International Monetary Fund had expected inflation to rise 8.7 percent in developing countries at the beginning of the year, but later revised its outlook to add another 2.8 percent after Russia invaded Ukraine in February.
Since then, prices in Lebanon spiked 211 percent in June, and Zimbabwe’s annual inflation rate jumped to 192 percent as food costs tripled and the Zimbabwean dollar lost more than two-thirds of its value against the dollar to become Africa’s worst-performing currency, according to RepublicWorld.com.
Sudan also reported a 192 percent inflation rate in June as its pound depreciated due to a lack of travel to the country during the pandemic.
There are now about 9.6 million people who were categorized as being highly food insecure in Sudan from April to May 2022, and the situation is only expected to get worse.
The Integrated Food Security Phase Classification said in a report that ‘with significant increases in food and commodity prices, a reduced harvest and continued conflict, acute food insecurity in Sudan continues to worsen rapidly.’
Meanwhile, Russia, which has suffered from sanctions since the invasion of Ukraine in February, reported a 15.9 percent inflation rate in June.
That was the lowest level in four months, according to Bloomberg, and is down from 17.7 percent the month before, as shortages begin to subside in the country.
In the US, officials have blamed the record-high inflation rate on the ongoing crisis in Ukraine and a rise in demand.
According to a report by the San Francisco Federal Reserve at the end of June, ongoing supply issues account for about half of the run-up in current inflation levels following COVID-related shutdowns and amid a nationwide labor shortage. And it reported that only about one-third of the United States’ inflation was demand-driven.
Some economists had therefore held out hope that inflation might be reaching or nearing a short-term peak before the consumer price index was released on Wednesday.
Gas prices, for example, have fallen from the eye-watering $5 a gallon reached in mid-June to an average of $4.66 nationwide as of Tuesday – still far higher than a year ago but a drop that could help slow inflation for July and possibly August.
In addition, shipping costs and commodity prices have begun to fall, pay increases have slowed, and surveys show that Americans’ expectations for inflation over the long run have eased – a trend that often points to more moderate price increases over time.
United States consumer inflation prices jumped to 9.1 percent in June to reach a 41-year high
Following the report on Wednesday, President Joe Biden urged American’s to stay calm, saying his administration was committed to tackling the issue.
‘While today’s headline inflation reading is unacceptably high, it is also out-of-date,’ Biden said, referencing that prices at the pump have fallen by 40 cents since mid-June. ‘Those savings are providing important breathing room for American families.
‘And, other commodities like wheat have fallen sharply since this report,’ the president claimed.
American President Joe Biden (who is on a trip to the Middle East) urged Americans to stay calm amid the inflation report
Some economists had held out hope that inflation might be reaching or nearing a short-term peak before the consumer price index was released on Wednesday. A customer is seen here looking at avocadoes for sale amid record-high prices for groceries
BIDEN’S FULL STATEMENT ON RECORD HIGH INFLATION
While today’s headline inflation reading is unacceptably high, it is also out-of-date. Energy alone comprised nearly half of the monthly increase in inflation. Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices, that have reduced the price at the pump by about 40 cents since mid-June. Those savings are providing important breathing room for American families. And, other commodities like wheat have fallen sharply since this report.
Importantly, today’s report shows that what economists call annual ‘core inflation’ came down for the third month in a row, and is the first month since last year where the annual ‘core’ inflation rate is below six percent.
Inflation is our most pressing economic challenge. It is hitting almost every country in the world. It is little comfort to Americans to know that inflation is also high in Europe, and higher in many countries there than in America. But it is a reminder that all major economies are battling this COVID-related challenge, made worse by Putin’s unconscionable aggression.
Tackling inflation is my top priority – we need to make more progress, more quickly, in getting price increases under control. Here is what I will do:
First, I will continue to do everything I can to bring down the price of gas. I will continue my historic release of oil from our strategic petroleum reserve. I will continue working with our European allies to put a price cap on Russian oil – sapping Putin of oil revenue. And, I will continue to work with the U.S. oil and gas industry to increase production responsibly — already, the U.S. is producing 12.1 million barrels of oil per day and is on track to break records.
But I will also continue to insist – as I have with urgency recently – that reductions in the price of oil must produce lower gas prices for consumers at the pump. The price of oil is down about 20% since mid-June, but the price of gas has so far only fallen half as much. Oil and gas companies must not use this moment as an excuse for profiting by not passing along savings at the pump.
Second, I will urge Congress to act, this month, on legislation to reduce the cost of everyday expenses that are hitting American families, from prescription drugs to utility bills to health insurance premiums and to make more in America.
Third, I will continue to oppose any efforts by Republicans – as they have proposed during this campaign year — to make things worse by raising taxes on working people, or putting Social Security and Medicare on the chopping block every five years.
Finally, I will continue to give the Federal Reserve the room it needs to help it combat inflation.
Experts, though, say the report is a sign that the United States is headed toward a recession.
Nearly half of traders now expect the Federal Reserve to raise interest rates by a full point, which would be the highest bump in 40 years after it raised interests by 0.75 percent last month.
And Bank of America analysts, led by economist Ethan Harris, for example, have warned that inflation has gotten to a point where a severe recession will be necessary to reign it in, Fox Business reported.
‘What seems to be forgotten here is that inflation is a sticky, slow moving variable,’ the analysts wrote.
‘The market is not a good gauge of inflation expectations for ‘real people’ and investors have an oversimplified view of the link between growth and inflation,’ they added.
‘In our view, it is going to be extremely hard for the Fed to get inflation back to target in a two-year time span.’
As a result, they say, the Federal Reserve will have to once again raise interest rates, which could tip the country into a recession as early as next year.
President Biden has now said he will let the central bank do what it must to fix the growing problem.
He said tackling the rising inflation is his top priority as he continued to blame it on the war in Ukraine and the effects of the COVID-19 pandemic.
‘Inflation is our most pressing economic challenge,’ Biden said. ‘But it is a reminder that all major economies are battling this COVID-related challenge, made worse by Putin’s unconscionable aggression.’
The president vowed to continue releasing America’s strategic oil reserves to help combat gas prices, push for legislation to reduce American’s healthcare and utility costs and to oppose ‘efforts by Republicans’ to raise taxes for working Americans.
He also said he would allow the Federal Reserve to work freely on what it needs to do to combat inflation.
Biden, however, admitted that ‘Inflation is the bane of our existence,’ last month as he shifted blame to the pandemic and its global impact.
‘Most of it’s the consequence of what’s happened, what happened as a consequence of the COVID crisis,’ Biden told NBC’s Lester Holt regarding the economic stress American’s are facing.
But the president refuted predictions from many economic experts who say the U.S. will face a recession in the coming months.
‘First of all, it’s not inevitable,’ he said. ‘Secondly, we’re in a stronger position than any nation in the world to overcome this inflation.
‘Be confident, because I am confident we’re better positioned than any country in the world to own the second quarter of the 21st century,’ Biden said. ‘That´s not hyperbole, that’s a fact.’
Still, recession concerns have been on the forefront of many American’s minds, a June AP-NORC poll found that 40 percent of adults said they thought tackling inflation should be a top government priority this year, up from just 14 percent who said so in December.
The Federal Reserve rolled out its biggest rate hike since 1994 last week to stem a surge in inflation
Federal Reserve Board Chairman Jerome Powell (pictured) said the Fed would likely raise interest rates up by 0.75 percent in July, with Biden saying the Fed was free to do what it needed. Economist say that the Fed’s actions would likely push the nation into a recession that would bring down inflation while at the same time hurting Americans’ pockets
The continued monthly increases of inflation would likely cement the case at the Federal Reserve for another large, 0.75 percentage point increase in its benchmark short-term interest rate, which is currently in a range of 1.5 percent to 1.75 percent.
At its rate-setting meeting last month, Fed officials implemented a 0.75 percentage point hike, the largest in nearly three decades.
The persistence of inflation has unnerved Fed Chair Jerome Powell and other Fed officials, who are engaged in the fastest series of rate hikes since the late 1980s in an effort to bring it to heel.
According to Market Watch, about 42 percent of traders expect the Fed to go beyond the 0.75 percent hike and implement a full 1 percentage point increase during its next meeting this month.
It personifies the fears brought on by the latest inflation report as only 7 percent of traders had believed a 1 percent hike was possible on Tuesday.
Powell has emphasized that the central bank wants to see ‘compelling evidence’ that inflation is slowing before dialing back its rate hikes.
Such evidence would need to be a ‘series of declining monthly inflation readings,’ he said at a press conference last month.
The U.S. is slated to unveil its official Gross Domestic Product numbers at the end of the month, which will reveal if America has truly entered a recession if the GDP is shown to have dipped for a second successive quarter.
United States sees one of the HIGHEST inflation rates among developed countries Source link United States sees one of the HIGHEST inflation rates among developed countries