Bidenflation More Worse than Expected: Consumer prices rise 9.1%

Inflation in the United States, already at 40 year highs, rose to an annual rate of 9.1 percent in June, the Department of Labor said Wednesday. This is the highest rate since 1981.

Compared to a month ago, the Bureau of Labor Statistics’ Consumer Price Index increased 1.3 percent.

Economists expected CPI would rise annually at 8.8 percent from 8.6 percent in May. The economists expected an increase in CPI month over month of 1.1 percent.

Inflation is a problem for American families. It raises prices for basic necessities such as food, fuel, housing, transport, utilities, and gasoline. The massive rise in gasoline prices in June that reached new highs several times throughout the month has impacted household and business spending.

Economists consider a sub-category that does not include fuel and food prices to be a better indicator of future inflation than the main number. This was up 5.9 percent in June compared with 12 months earlier. It rose by 0.7 percent for the month. These were both higher inflation rates than anticipated.

This was the 13th straight month of inflation running higher than five percent, meaning this year’s price increases are building on top of the decades high increases of last year.

Grocery store prices were up 12.2 percent annually and one percent for the month. Energy prices are up 41.6 percent annually and 7.5 percent since May. Gasoline prices jumped 11.2 percent in June compared with May, for a 59.9 percent year-over-year increase.

There was some hope that apparel inflation will slow down as big retailers said they are selling off stock to reduce costs. The price of clothes rose by 0.8 percent, which is 5,2 percent more than a year ago.

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Economists and journalists critical of Trump claimed that Trump’s tariffs would cause an increase in prices. However, prices for consumers remained relatively low during his presidency. Trump’s tariffs were not taxes for consumers. They were instead absorbed by Chinese exporters and producers, and the profits margins of large U.S. companies. companies.

Inflation began to pick up last March, after many years of falling below the Fed’s target of two percent. Although the economy was growing at an accelerated rate than anticipated, the Fed decided to maintain low interest rates in 2021. The American Rescue Plan was also endorsed by the Biden Administration, which saw billions in deficit spending. They combined these to increase demand faster than supply could expand and push up prices.

Federal Reserve Chief Jerome Powell initially stated that inflation was caused by transitory reasons, following advice from many economists. Fed officials forecast that inflation would fall in the latter half of 2021, predicting that supply chains would swiftly unsnarl and a rebalancing of consumer demand from goods to services would relieve pricing pressure. Under the guidance of Janet Yellen (ex-Fed chair) and Treasury Secretary, Biden’s administration followed closely and pressed for more spending.

Establishment media generally agreed with these views and portrayed the rise in inflation as temporary. Establishment outlets often referred to fears of long-lasting inflation as partisan fearmongering and denied that they were based on any rational basis. Although some outlets claimed that Trump’s tariffs had raised prices without evidence, others insisted that price hikes under Biden weren’t a big deal. Many claimed that inflation could be a blessing in disguise by higher wages. However, inflation has caused prices to rise faster than wages. This has led to a drop in the standard of living for many American families. The hardest hit were those with lower incomes. As inflation has eroded the savings value, middle-class Americans and those who are wealthy have also suffered.

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This government and the establishment media consensus were disastrous. The inflation rate continued to rise, which eroded the credibility of both the Biden administration as well the central bank in dealing with the issue. Fed officials began to signal that they were going to raise interest rates in the latter part of last year and dropped “transitory.” Capitol Hill Democrats were forced to abandon ambitions for socially-transformative huge spending on so-called “human infrastructure.”

The public has lost faith in President Biden’s ability to do the job. Americans saw the assurance that inflation would go as a signal that the government didn’t care about families who have to pay more for fuel, food and Fourth of July meals. Recent polls have shown that Biden is now the least popular president in 75 years.

The Biden administration and Capitol Hill Democrats have sought to blame higher prices on corporate greed and price gouging–an idea that has largely been met with mockery, even by self-described liberal economics columnists like the Washington Post‘s Catherine Rampell. In fact, corporate profits declined 2.2 percent in the first quarter of this, a $63.8 billion decline, indicating that businesses are also being squeezed by inflation. The outlook for the future of business conditions among owners of small businesses fell to the worst level in 48 years in June, the National Federation of Independent Business said Tuesday.

Consumer mood, measured using the University of Michigan index is at its lowest level in over a decade. In the first quarter, the economy experienced a contraction and it looks like the economy will contract again in the second quarter. Consumption grew by 1.8% in the first three quarters of this year, and by 0.2 percent in May. Economists predict a similar week for consumer spending in June. These numbers are lower than inflation and indicate that real spending is falling. Due to rising prices, consumers are purchasing less goods and services but spending more.

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The Federal Reserve has switched to an inflation-fighting mode. The Fed raised its target rate by 75 basis points in June, the biggest single-meeting hike since 1994. It is expected that it will implement another 75 basis point increase at its July meeting in two weeks. Following the June CPI report, futures markets implied very strong odds that the Fed would increase rates by 75 basis points in September, as well. Previously, the fed funds futures market had seen a smaller, 50 basis point hike as more likely at that meeting.

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