WASHINGTON: Red-hot US inflation is showing few signs of cooling, putting the Federal Reserve on track to continue its aggressive interest rate increases to help cool high prices that are challenging Joe Biden's presidency.
The hoped-for signs of relief for American families did not materialize in May as consumer prices hit a new four-decade high, rising 8.6 percent and topping what economists thought was the peak in March, reports AFP.
The US central bank already had signaled plans for more big increases in the benchmark borrowing rate this week and next month, but chances are rising that the Fed might have to be even more aggressive -- which increases the risk the economy might tip into a recession.
The latest inflation report -- the last major data point before the Fed's policy meeting Tuesday and Wednesday -- also douses hopes central bankers will be able to call a ceasefire in September ahead of key congressional elections, where Biden's Democrats are widely expected to suffer damaging losses.
Prices continued to rise last month for a range of goods, including housing, groceries, airline fares and used and new vehicles, setting new records in multiple categories, according to the Labor Department data.
Energy has soared 34.6 percent over the past year, the fastest since September 2005, while food jumped 10.1 percent, and the cost of fuel oil more than doubled, jumping 106.7 percent, the largest increase in the history of CPI, which dates to 1935.
The CPI surge "raises the probability of even more aggressive Fed rate hikes to tamp down on inflationary expectations," said Mickey Levy of Berenberg Capital Markets
Diane Swonk of Grant Thornton indicated such a move is possible.
"They are behind the curve and eager to catch up," she said on Twitter. "Fed has to reduce demand to meet a supply-constrained world. Ugly in many ways."
Economists at Barclays are now calling for a 0.75-point increase, though Ryan Sweet at Moody's says chances are low, and Karl Haeling at LBBW expects three more half-point hikes.