American inflation tops forecasts yet again, adding to recession risks
The Fed is under pressure to crank up interest rates more aggressively
![Mandatory Credit: Photo by MICHAEL REYNOLDS/EPA-EFE/Shutterstock (13026929g)A customer looks at food items near tomatoes for sale a grocery store in Washington, DC, USA, 11 July 2022. Consumers' expectations for prices to continue rising over the next year hit an all-time high, according to a monthly survey from the Federal Reserve Bank of New York. Inflation expectations rose to 6.8 percent in June 2022 from 6.6 percent a month earlier. Consumer prices increased 8.6 percent in May 2022 - the highest increase in 40 years.Consumers inflation expectations hit record high, Washington, Usa - 11 Jul 2022](https://www.economist.com/cdn-cgi/image/width=1424,quality=80,format=auto/media-assets/image/20220716_FNP001.jpg)
At this point upside surprises in inflation occur with such frequency that surprise is probably the wrong word for them. So it was with America’s consumer price index (cpi) for June, published on July 13th. It soared 9.1% compared with a year earlier, marking yet another four-decade high and beating forecasts for an 8.8% increase. Still, investors seemed to be caught unawares, with stocks falling sharply after the data, adding to this year’s big losses. The pessimism in financial markets is easily understood: persistently high inflation is forcing the Federal Reserve to press on with aggressive monetary tightening, even at the potential cost of a recession.
This article appeared in the Finance & economics section of the print edition under the headline “On the up and up”
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