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US inflation at new 40-year high

WASHINGTON (AP) – The prices of gas, food and most other goods and services jumped in May, raising inflation to a new four-decade high and giving households no respite from rising costs in the United States (US).

Consumer prices surged 8.6 per cent last month from a year earlier, faster than April’s year-over-year increase of 8.3 per cent, the Labor Department said on Friday. The new inflation figure, the highest since 1981, will heighten pressure on the Federal Reserve to continue raising interest rates aggressively.

On a month-to-month basis, prices jumped one per cent from April to May, much faster than the 0.3 per cent increase from March to April. Contributing to that surge were much higher prices for everything from airline tickets to restaurant meals to new and used cars.

Those price spikes also elevated so-called “core” inflation, a measure that excludes volatile food and energy prices. In May, core prices jumped a sharp 0.6 per cent for a second straight month. They’re now six per cent above where they were a year ago.

Friday’s report underscored fears that inflation is spreading well beyond energy and goods whose prices are being driven up by clogged supply chains and Russia’s invasion of Ukraine.

It also sent stock prices tumbling. The increased pressure on the Fed to raises rates even faster – which means higher-cost loans for consumers and businesses – will raise the risk of a recession, too.

“Virtually every sector has higher-than-normal inflation,” said head of global economic research at Bank of America Ethan Harris.

“It’s made its way into every nook and cranny of the economy. That’s the thing that makes it concerning, because it means it’s likely to persist.”

Gas prices rose four per cent just in May and have soared nearly 50 per cent in one year.

Bags of Pistachios are displayed at a grocery store in Mount Prospect. PHOTO: AP