Consumer inflation in June rises at fastest pace in 11 months

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Consumer prices jump 0.7 percent in June
Consumer inflation in June rises at fastest pace in 11 months as gasoline costs surge

    * By Martin Crutsinger, AP Economics Writer
    * On Wednesday July 15, 2009, 8:43 am EDT

WASHINGTON (AP) -- Consumer prices shot up in June by the largest amount in 11 months, reflecting the biggest jump in gasoline prices in nearly five years.

The Commerce Department said Wednesday that inflation at the consumer level rose by 0.7 percent last month, slightly higher than the 0.6 percent increase that economists were expecting. It was the biggest one-month gain since a 0.7 percent increase last July.

The big jump was seen as a temporary blip, however. Inflation is not expected to be a problem any time soon given a severe recession which is keeping a lid on wage pressures.

Underscoring the low threat of accelerating inflation, prices in June compared to a year ago were actually down by 1.4 percent, the biggest year-over-year decline in nearly six decades.

Core inflation, which excludes food and energy, posted a moderate 0.2 percent rise in June, slightly higher than the 0.1 percent rise that economists had expected.

The absence of an inflation threat has allowed the Federal Reserve to drive a key interest rate to a record low in an effort to fight a severe recession which is already the longest since World War II. The central bank pushed its target for the federal funds rate to near zero in December and it is expected to remain there until the nation's unemployment rate, currently at a 26-year high of 9.5 percent, stops rising.

The 0.7 percent jump in the Consumer Price Index in June followed three months of moderation including a small 0.1 percent rise in May.

The upward surge was driven by a 7.4 percent rise in energy prices, reflecting a 17.3 percent increase in gasoline prices, the biggest one-month jump in gas prices since a 20.9 percent spurt in September 2005 after Hurricane Katrina had shut Gulf Coast refineries.

Analysts are looking for gasoline and other energy costs to retreat in coming months. Already, gasoline pump prices are down by about a dime since the start of July.

Food costs edged up a small 0.1 percent in June, held back by a big drop in the cost of dairy products.

xiaobailong

Is this good news or bad news?

mary666

bad

frank

Bad news!  That means Fed should be very careful while printing the $$$$.   Also means when there is less "hot money" injected in the market, banks will be in trouble again, cause they haven't been using the Fed money (actually, our taxpayer's money) to create more loans to companies, to expend their business... In the long run (0.5-1 year), it will show the damage.

polopolo

Hehe, this is great news for bulls.

The key is: Everyone must believe hyper inflation is in the play.

Sub-key 1: Fed will not stop printing money
Sub-key 2: The inflation must be hyper, not just high

If the inflation is high, why should anyone holds cash? Treasury? Bond? No, all rush to stock market!

If I am Fed, the biggest worry I have is that the inflation is so low that US actually has to pay China/Japan/Russia/Mideast/All the idiots who have dollars something.

Internally, inflation is a good way to adjust (aka lower) social benefits without causing an uprising.

Whether Fed can succeed or not, that is the question. Fed may have problem printing trillions of dollars without causing public uproar. On the foreign side, expect China and Japan to acquire more assets. Recently, China bought some oil field with very high price, that is a sign.

layschips

Hehe, this is great news for bulls.

The key is: Everyone must believe hyper inflation is in the play.

Sub-key 1: Fed will not stop printing money
Sub-key 2: The inflation must be hyper, not jus ...
polopolo 发表于 2009-7-15 10:30

but don't you think the expectation of hyper inflation will drive all those idiot countries from buying any more US debts? they are still not that idiot... and it can kill the entire US economy...