U.S. inflation hits 40-year high in June

US consumer prices accelerated 9.1% y/y in June, a four-decade high that surpassed most analysts' forecasts and supports the US Federal Reserve's current policy of sharply raising interest rates.

The consumer price index (CPI) in June rose to the highest since November 1981, exceeding the annual rate in May by 8.6%, the US Bureau of Labor Statistics (BLS) reported. Excluding energy and food, the so-called core inflation index rose 5.9% in June, down from 6% in the 12 months to May.

President Joe Biden said headline inflation was "unacceptably high" but also out of date because it does not fully reflect the fall in retail gasoline prices of about 40 cents on the US dollar since mid-June. Energy purchases accounted for almost half of inflation growth last month.

Biden said fighting inflation is his "top priority" and he will continue to work to bring down fuel prices. He said he would seek to cap Russian oil prices and work with domestic oil and gas producers to increase production "responsibly", but said he wanted gasoline to be reflected in the recent drop in oil prices.

“Oil and gas companies should not use this moment as an excuse to turn a profit by not passing on savings at the gas station,” Biden said.

A larger-than-expected increase in headline inflation means the Fed is more likely to repeat last month's 0.75 percentage point rate hike at its meeting later this month in a bid to cut borrowing and lower inflation. The rate hike "should continue to dampen growth and help better balance supply and demand," the Fed said last month.

Compared with the previous month, the overall consumer price index rose 1.3% in June, accelerating from 1% in May, the BLS said. Core inflation rose 0.7% MoM in June from 0.6% in May.

The rise in the CPI was wide-ranging, with housing, gasoline and food prices rising first.

The Energy Consumption Index rose 41.6% year-on-year, the largest annual increase since the period ending April 1980. The food index rose 10.4% a year, the biggest increase since February 1981.

Energy products rose by 60.6% in 12 months, while gasoline prices rose by 59.9% and heating oil by 98.5%. Utility natural gas was up 38.4% and electricity was up 13.7% year on year.

Compared to the previous month, energy products rose 10.4% in June after rising 4.5% in May. Gasoline rose 11.2% after rising 4.1% in the previous month. Food products rose 1% after rising 1.2% the previous month.