Food costs climbed another 1.2% in May, bringing the year-over-year gain to 10.1%.
Shelter costs, which account for about a one-third weighting on the CPI, rose 0.6% for the month, the fastest one-month gain since March 2004. The 5.5% 12-month gain is the most since February 1991.Those escalating prices meant workers took another pay cut during the month. Real wages when accounting for inflation fell 0.6% in April, even though average hourly earnings rose 0.
Friday's numbers dented hopes that inflation may have peaked and adds to fears that the U.S. economy is nearing a recession. The inflation report comes with the Federal Reserve in the early stages of a rate-hiking campaign to slow growth and bring down prices. May's report likely solidifies the likelihood of multiple 50 basis point interest rate increases ahead.
"Obviously, nothing is good in this report," said Julian Bridgen, president of MI2 Partners, a global macroeconomic research firm."There is nothing in there that's going to give the Fed any cheer. ... I struggle to see how the Fed can back off." With 75 basis points of interest rate rises already under its belt, markets widely expect the Fed to continue tightening policy through the year and possibly into 2023. The central bank's benchmark short-term borrowing rate is currently anchored around 0.75% -1% and is expected to rise to 2.75%-3% by the end of the year, according to CME Group estimates.
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