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Inflation and wage data suggest that US prices will continue to

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WASHINGTON — Inflation spiked in June and average wages for workers accelerated in the spring. This suggests that Americans likely won’t feel relief from rising inflation anytime soon, and that the Federal Reserve feels compelled to raise borrowing costs even further.

An inflation measure closely tracked by the Federal Reserve rose 6.8% in June from a year ago, the government said Friday. This is the biggest rise in 40 years. Much of the increase was due to energy and food.

On a monthly basis, prices also jumped 1% in June, the biggest rise since 2005. Even excluding the vulnerable food and energy categories, prices he rose 0.6% from May to June.

Wages for employees, excluding civil servants, rose 1.6% from April to June, matching the all-time high set last fall. tend to.

Friday’s numbers underscored the persistence of inflation eroding Americans’ purchasing power, undermining their confidence in the economy and threatening Congressional Democrats ahead of November’s midterm elections.

Some signs point to certain categories of inflation likely to ease in the coming months, but not by much.

Similarly, prices of commodities such as wheat and copper plummeted.

But more persistent inflation drivers show little evidence of a slowdown. Wages data, a measure known as the Cost of Employment Index, released on Friday showed that salaries are still growing at a solid pace. While this is good for workers, it could make the Fed worried about the impact on prices. Chairman Jerome Powell specifically cited the move as a source of concern for central bank policymakers at a press conference on Wednesday.

“This is keeping the Federal Reserve up at night (report),” said Omaia Sharif, president of Inflation Insights.

The government also reported on Friday that consumer spending was slightly above last month’s inflation rate, rising 0.1% from May to June. Spending actually skyrocketed, but most of the gains were offset by rising prices.

Rising consumer demand for services such as airline tickets, hotel rooms and dining at restaurants is still fueling inflation. However, many retail and consumer goods chains say inflation is weighing on shoppers, indicating that consumer spending could fall even further.

Walmart said this week that profits would dwindle as customers spent on more expensive groceries and gas and were unable to buy clothes and other discretionary items. have lowered their sales and profit forecasts as consumers have been forced to cut back on their electronics purchases.

Inflation is rising so quickly that most consumers are lagging behind the rising cost of living, even though many workers have gotten raises.

High inflation and interest rates are also hampering the US economy, which contracted for two consecutive quarters from April to June, fueling fears of a looming recession. Two-quarters of the growth slowdown meets the unofficial rule of thumb for when a recession will start, but robust employment means the economy still maintains strong pockets and is still slipping into recession. does not imply

On Wednesday, the Federal Reserve raised its benchmark interest rate by three-quarters of a percentage point for the second straight time in the most aggressive move in more than 30 years to curb high inflation. Powell has suggested that the Federal Reserve may raise interest rates incrementally in the coming months.

Still, he stressed that Fed policymakers believe fighting inflation is a top priority. He made no suggestion that the Fed could slow or cancel rate hikes this year or early next year if inflation remains high due to the weakening economy.

The Federal Reserve is increasing the cost of taking out mortgages, auto loans, and business loans by raising borrowing rates. The goal is to keep consumers and businesses borrowing, spending and hiring less, thereby cooling the economy and slowing inflation.

Globally, inflation is weighing on other economies as well. This month, prices jumped 8.9% from the previous year in her 19 European countries that use the euro currency. European economies, hit particularly hard by higher natural gas and oil prices resulting from Russia’s invasion of Ukraine, grew slightly in the second quarter.

The Federal Reserve monitors Friday’s inflation indicator, called the Personal Consumption Expenditure Price Index, and more closely monitors the government’s better-known consumer price index. Earlier this month, the CPI reported that inflation accelerated to 9.1% year-on-year in his June. This is his highest price in nearly 41 years.

The PCE index tends to show lower inflation than the CPI. Rents rising at the fastest pace in 35 years weigh more on his PCE than CPI.

The PCE price index also seeks to take into account changes in how people shop when inflation spikes. As a result, you can, for example, catch when consumers switch from expensive national brands to cheaper store brands.

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