The costs of gas, food and other necessities jumped in May, raising inflation to a new four-decade high and giving American households no respite from rising costs.
Grocery costs surged nearly 12% from a year earlier, the biggest such increase since 1979. Rising prices for grain and fertilizer in the wake of the Ukraine invasion, is intensifying that rise. Restaurant prices jumped 7.4% in the past year, the largest 12-month gain since 1981. Owners are also facing immense pressure to raise wages in a heated job market.
In light of Friday's inflation reading, the Fed is all but certain to carry out the fastest series of interest rate hikes in three decades. By sharply raising borrowing costs, the Fed hopes to cool spending and growth enough to curb inflation without tipping the economy into a recession. For the central bank, it will be a difficult balancing act.
Biden plans to address inflation later Friday in a speech at the Port of Los Angeles, which is moving a record amount of cargo around the clock under an agreement the White House shepherded. Yet even as the number of ships waiting to unload at the port has fallen sharply, inflation has not. A report from the World Bank this week made clear that high inflation is a global problem that threatens to slow economies around the world.
Wages are not rising as fast as inflation, but they are still increasing at the fastest pace in several decades,. And many households — including lower-income ones — accumulated savings from government support payments during the pandemic. They're now drawing on those savings to keep up with higher prices.
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