A U.S. government report Wednesday is expected to show that consumer prices soared 8.8% in June compared with a year earlier, according to data provided by FactSet.
There are three factors that could lead to inflation which include demand-pull inflation, cost-push inflation and built-in 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.
Such large price increases would also highlight the brutal impact that inflation has had on many families' finances, as the costs of many necessities has soared at a faster pace than incomes. Lower-income Americans and Black and Hispanic families have fared worse, as a greater percentage of their budgets are spent on items like gas and food.
Still, rising prices have caused a steep decline in consumers' confidence in the economy, dragged down President Joe Biden's approval ratings and present major political risks for congressional Democrats this fall. Forty percent of U.S. adults said tackling inflation should be a top government priority this year in a June AP-NORC poll, up from just 14% in December.
Excluding the volatile food and energy categories, prices likely rose 0.6% in June for the third straight month and 5.7% from a year earlier.Monthly increases of that size 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% to 1.75%. At its rate-setting meeting last month, Fed officials implemented a 0.75 percentage point hike, the largest in nearly three decades.
Some economists worry that the Fed's desire to quell inflation could cause it to hike rates too quickly, even as the economy, by some measures, is slowing. Much higher borrowing costs could tip into recession next year. Inflation is likely to slow later this year, but it's not clear by how much. Oil prices fell Tuesday to about $96 a barrel and other commodities, including metals such as copper, have also gotten cheaper, mostly because of recession fears in the U.S. and Europe.
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