U.S. inflation likely reached a new 40-year high in June, driven up by a spike in gas costs, more expensive food and rent, and pricier cars and hotel rooms. A government report Wednesday is expected to show that consumer prices soared 8.8% in June compared with a year earlier, according to data provide FactSet. That would be an increase from 8.6% in May and the biggest yearly rise since December 1981. Inflation at that level would make it highly likely the Federal Reserve will implement another large interest rate increase at its next meeting in two weeks. Higher rates are intended to cool consumer and business spending and slow the economy and inflation.
On a monthly basis, economists forecast that Wednesday's report will show prices rose 1.1% in June from May, according to FactSet. Some economists estimate that as much as half of that gain would reflect higher prices at the pump.
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. Consumers have started to pull back a bit on spending, home sales are falling as mortgage rates rise, and factory output slipped in May.
Shipping costs for international freight have fallen and there are fewer ships stuck at the Port of Los Angeles and Long Beach, America's largest. Wholesale gas prices have fallen to about $3.40 a gallon, which suggests retail prices could drop to as low as $4.20 by August, according to Omair Sharif, founder of Inflation Insights. Wholesale used car prices are also falling, which point to declining used car prices in the coming months.
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