The cost of living in the United States rose sharply last month, as inflation jumped 0.6 percent in May, the biggest increase in 40 years.
The Labor Department said on Wednesday that the consumer price index, which measures what Americans pay for everything from rent to haircuts, rose at its fastest pace since August 2008.
Inflation has been rising steadily this year as the economy rebounds from the pandemic-induced recession. The government’s stimulus measures have also helped to push prices higher.
The Fed has said it is not worried about inflation at this point and that any increases are likely to be temporary. But some economists say the central bank may have to start raising interest rates sooner than expected to keep inflation in check.
The latest inflation data is likely to add to the debate within the Fed about when to start tapering its bond-buying program, which has been credited with helping to support the economic recovery.
Last month, the Fed said it would continue buying $120 billion in bonds every month until the labor market improves substantially. But with unemployment falling and inflation rising, some policymakers are now saying it may be time to start scaling back the program.
The Fed will meet next week to discuss monetary policy, and chair Jerome Powell is scheduled to hold a news conference afterward. Investors will be closely watching for any clues about the central bank’s plans.
The inflation data comes amid a debate within the Fed about how to deal with rising prices.
In minutes of the Fed’s last policy meeting, released on Wednesday, some policymakers said they were concerned that the central bank’s bond-buying program could lead to an overshooting of inflation.
But other officials said they thought the risks of inflation were still low and that the Fed should continue with its bond-buying program until the labor market has improved further.
The minutes showed that the debate about how to address inflation is ongoing within the Fed, and that no consensus has been reached.
The consumer price index rose 4.2 percent year-over-year in May, the biggest annual increase since September 2008.
The core CPI, which excludes volatile food and energy prices, rose 3.8 percent.
The inflation data is likely to add to the debate within the Fed about when to start tapering its bond-buying program, which has been credited with helping to support the economic recovery.
Some economists say the central bank may have to start raising interest rates sooner than expected to keep inflation in check. The Fed will meet next week to discuss monetary policy, and chair Jerome Powell is scheduled to hold a news conference afterward. Investors will be closely watching for any clues about the central bank’s plans.
The inflation data comes as the United States is seeing a rapid economic recovery from the coronavirus pandemic. The economy grew at a 6.4 percent annual rate in the first quarter, and many economists expect even faster growth in the second quarter.
The cost of renting an apartment increased by 0.5% in January, the biggest increase in 20 years.
Apartment rental costs rose 0.5% in January, the fastest pace in 20 years as the strengthening economy boosted demand for apartments. The cost of living in the United States rose sharply last month, as inflation jumped 0.6 percent in May, the biggest increase in 40 years.
The consumer price index rose 4.2 percent year-over-year in May, the biggest annual increase since September 2008.The core CPI, which excludes volatile food and energy prices, rose 3.8 percent. The inflation data is likely to add to the debate within the Fed about when to start tapering its bond-buying program, which has been credited with helping to support the economic recovery. Some economists say the central bank may have to start raising interest rates sooner than expected to keep inflation in check. The Fed will meet next week to discuss monetary policy, and chair Jerome Powell is scheduled to hold a news conference afterward where investors will be closely watching for any clues about the central bank’s plans.
Electricity prices surged 4.2% in January alone as the winter weather boosted demand.
Food prices were also up, with the cost of eggs rising 7.5% and the price of beef and veal rising 4.3%.
Inflation is being driven by the strong economic recovery, which is leading to higher demand and prices for goods and services. The cost of living in the United States rose sharply last month as inflation jumped 0.6 percent in May, the biggest increase in 40 years.
