U.S. consumer prices accelerated the most in nearly 13 years in May as accompanied demand combined with higher prices for goods raised concerns about inflationary pressures.
Consumer prices rose 5 percent last month compared to a year ago, the Bureau of Labor Statistics said Thursday. That represents the strongest increase since an acceleration of 5.4 percent in August 2008, and compares with an increase of 4.2 percent in April.
Excluding volatile items such as food and energy, core CPI rose 3.8 percent in May on an annual basis, following a 3 percent increase in April.
While recent price growth may be partly attributed to low inflation levels at the onset of the coronavirus pandemic, it has also been driven by rising commodity prices and demand for car rentals, hotels and flights as well. the U.S. economy has reopened.
The index for used cars and trucks rose 7.3 percent in May, accounting for about a third of rising inflation. Prices of used cars they jumped in the midst of a shortage of semiconductors that affected car production.
Federal Reserve policymakers have been more tolerant of inflation in part because consumer prices have been subdued for so long despite a weak monetary policy.
The Fed has repeatedly said that recent inflation growth was likely to be transitory, not sustained. Minutes of the central bank’s April monetary policy meeting showed that officials have maintained a relatively bloody approach to inflation.
But Gregory Daco, the U.S. chief economist at Oxford Economics, said that while certain factors driving inflation – such as base effects and higher energy prices – are dissipating, some increases would be “sticky”. “.
Some, including Republican lawmakers, argue that the Fed has underestimated the risk of higher inflation.
“Inflation fears are a bit like phantom limb pain in that they actually cut the problem but it still hurts, and it hurts because the fear is remembered even if the limb is gone,” James said. Sweeney, chief economist at Credit Suisse.
He said there were signs that demand was responding to higher prices in a normal way, pointing to the decline in mortgage applications as an example. “It’s proof that we’re not in for a serious rise in inflation driven by expectations,” he said.