June 13, 2022 — Inflation Jumps in May to 40-Year High


Just ahead of this week’s Federal Reserve meeting, where expectations are for a 0.5 percent rate hike, inflation data for May was released. After a slight pullback in April, inflation was up 8.6 percent year over year. High inflation is forcing the Fed to institute the fastest series of rate increases in 30 years.  The Fed hopes to slow down spending and growth enough to rein in inflation, yet not pushing the economy into a recession.

Energy prices are up due to the war in Ukraine, and strong wage gains and hiring are propping up demand as inflation rises. People have stimulus monies to spend, and the supply chain issues are not yet resolved which are creating pent up demand. Spending on services and travel have rebounded as covid worries abate.

The Fed will be raising rates this week by at least 0.5 percent, but a 0.75 percent increase is not impossible, according to some.  A number of economists are forecasting 0.5 percent hikes in June, July and September. The consensus expects the Fed’s fund rate to be 2.625% by year end, up from 1.875% they predicted in March.