That’s the highest level in more than 40 years and higher than the previous reading, when prices rose by 8.6% for the year ended in May. It is also much higher than the 8.8% that economists had predicted, according to Refinitiv.
The Consumer Price Index for June also showed that overall prices that consumers pay for a variety of goods and services rose by 1.3% from May to June.
The increases, however, were felt across all categories. Prices for food at home were up 12.2% over the year, with eggs up 33.1%, butter up 21.3%, milk up 16.4%, chicken up 18.6%, and coffee up 15.8%. Shelter costs were up 5.6%.
Tackling inflation is ‘a top priority’
President Joe Biden said Wednesday the June CPI inflation reading was “unacceptably high” but noted that it is “also out of date,” since gas prices have lowered in the last 30 days. Gasoline and crude oil prices are now below $100 per barrel, down from their highs in June.
“Energy alone comprised nearly half of the monthly increase in inflation,” Biden said. “Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices, that have reduced the price at the pump by about 40 cents since mid-June. Those savings are providing important breathing room for American families. And, other commodities like wheat have fallen sharply since this report.”
Biden also reiterated that tackling inflation is his “top priority.”
The typical American household now needs to spend $493 more per month to buy the same goods and services they did at this time last year, said Mark Zandi, chief economist at Moody’s Analytics.
And, as prices continue to rise, they’re also outstripping wage gains.
Real average hourly earnings — which represent wage growth adjusted for inflation — slumped 1% from May to June and are down 3.6% from June 2021, according to separate BLS data released Wednesday.
“Inflation has pretty much eroded most of the gains,” said Kathy Jones, managing director and chief fixed income strategist at Charles Schwab. “People’s purchasing power is going down.”
How this might impact rate hikes
Stripping out food and energy costs, which tend to represent transitory fluctuations, core CPI prices rose by 0.7% from May to June and by 5.9% for the 12-month period ended in June.
The Federal Reserve pays particular attention to that core data when assessing future inflationary trends, and the latest numbers likely give the central bank a green light to continue with its aggressive series of rate hikes to cool off the economy and bring down higher prices. The Fed is widely expected to raise its benchmark interest rate by at least 75 basis points at its next monetary policymaking meeting on July 26-27.
While it’s too soon to say whether inflation has peaked (especially given the broader volatility within the global economy), core inflation appears to have leveled off, and expectations are for it to continue to come down in the year-over-year comparison, said Cailin Birch, global economist at the Economist Intelligence Unit.
‘What everyone’s worried about is this day’s inflation data or what happened yesterday, so [the Fed is] having to work with backward-looking information in order to make forward-looking decisions,” she said. “I think they are going to decide to focus on keeping inflation expectations anchored, reassuring the market. And that means the higher interest rate hikes, but it brings more recession risks moving forward.”
CNN’s Allie Malloy contributed to this report.