US inflation rate at 26-year high

[THE BOUNCER]

BBC NEWS | Business | US inflation rate at 26-year high

US inflation accelerated at the fastest rate in 26 years in June, fuelled higher by surging energy prices, official figures have shown.

Consumer prices rose by 1.1% in June, the Labor Department said, more than the 0.7% many analysts had expected.

Federal Reserve boss Ben Bernanke said on Tuesday that the threat of rising inflation had intensified recently.

High inflation will make it harder for the Fed to cut rates and boost an economy hurt by a housing market slump.

'Fed in a hole'

The Fed chairman, who faces his second day of congressional testimony on Wednesday, also warned about the "downside" risks to growth in the world's largest economy.

Many analysts now believe that the central bank may have to leave borrowing costs on hold as it tries to steer a faltering economy through turbulent times.

"There is so much uncertainty in the market right now that news of higher inflation doesn't mean a rise in interest rates," said Stephen Malyon, analyst at Scotia Capital in Toronto.

The US faces a severe housing slump, a credit crunch and financial market turmoil stemming from the collapse of the sub-prime mortgage market.

The impact of surging living costs in June "really puts the Fed in a hole," said Alan Ruskin, an economist at RBS Greenwich.

Gary Thayer of Wachovia Securities agreed that the Fed was facing a tricky balancing act.

"This increases concern that the Fed is not going to be able to lower interest rates if the economy remains weak," he explained.

"And as long as the economy remains weak, it will be hard for the Fed to raise rates to fight inflation."

On annual basis, prices were 5% higher when compared with June 2007, the Labor Department said.

Energy surge

Energy prices were the main driver of price growth, and were 6.6% higher in June as the cost of petrol, natural gas and heating oil increased.

Expectations that that a slowing US economy will dampen demand for oil helped crude prices drop 42 cents to $138.32 in pre-market trade in New York.

The annual core inflation rate, which strips out volatile fuel and food prices, was 2.4%.

The surge in living costs has also dented the earning power of Americans.

Average weekly wages, after adjusting for inflation, fell by 0.9% in June - the biggest monthly decline in 24 years, the Department said.

[hitmansb]

I like the headline about this on Drudge Report...it's got the WalMart smiley price rollback guy shedding a tear.

[Mr incredible]

it's all about the oil, its killing the US and UK economy. I'll sure be glad when things bottom out. Until the oil price comes down its difficult for central banks to be told to drop interest rates since if they do, inflation flys, but if they don't the ecomomy keeps tumbling.

[fog_hat1981]

Things will fix themselves...

[THE BOUNCER]

Originally Posted by fog_hat1981

Things will fix themselves...

something big usually has to happen first. kind of like the nuke to end world war 2. lol

[fog_hat1981]

Originally Posted by THE BOUNCER

something big usually has to happen first. kind of like the nuke to end world war 2. lol

Nah - things are already fixing themselves...

China is finally starting to feel the blows of the oil issues - they're faced with increasing import prices - their relations with retailers like WalMart are suffering as a result of their increasing prices to produce goods while WalMart keeps pushing for them to lower costs - the list goes on and on with issues like that....

India had close to an 11% increase in inflation recently (read the article maybe 3 weeks ago so I can't recall the exact dates/times involved in that figure but they're far reaching - not just for the month etc) and they're faced with an ever increasing poverty issue while forced to play with their economic variables due to inflation/oil prices/increases in the cost or transportation/manufacturing etc......

The issue we are faced with is affecting the entire globe and the issues they're faced with will affect us in turn....

Not to mention the end of the war will likely boost things on all levels as well....

[THE BOUNCER]

Originally Posted by fog_hat1981

Nah - things are already fixing themselves...

China is finally starting to feel the blows of the oil issues - they're faced with increasing import prices - their relations with retailers like WalMart are suffering as a result of their increasing prices to produce goods while WalMart keeps pushing for them to lower costs - the list goes on and on with issues like that....

India had close to an 11% increase in inflation recently (read the article maybe 3 weeks ago so I can't recall the exact dates/times involved in that figure but they're far reaching - not just for the month etc) and they're faced with an ever increasing poverty issue while forced to play with their economic variables due to inflation/oil prices/increases in the cost or transportation/manufacturing etc......

The issue we are faced with is affecting the entire globe and the issues they're faced with will affect us in turn....

Not to mention the end of the war will likely boost things on all levels as well....

well i hope you are right. we are all dealing with this mess.

[Akira]

Originally Posted by hitmansb

I like the headline about this on Drudge Report...it's got the WalMart smiley price rollback guy shedding a tear.

LMAO... and I thought I was the only one that laughed at that!