Political heat rises with prices

With inflation climbing ever higher in the United States, attention is fixed on the likelihood of a further tightening in interest rates by the Federal Reserve this month as the political fallout from soaring prices comes into sharper focus.

The consumer price index, or CPI, released on Wednesday by the Bureau of Labor Statistics rose by 9.1 percent in June, the largest increase in more than four decades, and the central bank is now expected to push up interest rates by a further 0.75 percentage point, as it did on June 15.

"The increase was broad-based, with the indexes for gasoline, shelter, and food being the largest contributors," the bureau said.

With motorists now paying well over $5 a gallon to fill up, US President Joe Biden is taking a hit in his approval ratings. Polls have shown him languishing at levels below 40 percent support, with the surging prices for food and fuel a key grievance.

Desmond Lachman, a resident fellow at the American Enterprise Institute, told Xinhua News Agency: "Today's shockingly high consumer price inflation number does not bode well for our country's economic outlook."

Financial markets overwhelmingly expect the central bank to raise its policy rate at the meeting on July 26-27. While most observers expect the 0.75 percentage point rise, an increase of a full percentage point has not been ruled out. Providing more clues will be the University of Michigan's consumer inflation expectations survey on Friday.

"For the Fed, this latest reading is miles away from 'compelling evidence' that inflation is coming down," Gregory Daco, the chief economist at consultancy EY-Parthenon, wrote in a research note.

The larger-than-expected rise in the year-on-year CPI reported on Wednesday also reflects higher prices on a variety of goods and services, including motor vehicles, apparel and household furniture. The index increased by the most in nearly 17 years on a monthly basis.

The fact that core inflation picked up on a monthly basis is "particularly concerning for the Fed", Blerina Uruci, an economist at asset manager T. Rowe Price, told The New York Times. "It's sending a broad-based signal; it's not being driven by one or two volatile components."

The US economy shrank in the first three months of the year, and many analysts believe the trend continued in the second quarter.

"The Fed's rate hikes are doing what they are supposed to do, which is kill off demand," Megan Greene, global chief economist at the Kroll Institute consultancy, told The Associated Press. "The trick is if they kill off too much and we get a recession."

The high inflation numbers are piling the pressure on Biden and his Democratic Party heading into the midterm congressional elections in November.

High disapproval rating

Biden's approval rating stood at 39 percent, a Reuters/Ipsos opinion poll completed on Tuesday found. It also found that 55 percent of US citizens disapprove of Biden's job performance.

Across the US, the relentless pace of price increases is frustrating many people.

Delores Bledsoe, a truck driver hauling freight from Carlisle, Pennsylvania, to Wisconsin on Wednesday, said her fuel costs have tripled. "It's making me want to get out of the truck and go drive an Uber," Bledsoe told AP, who lives in Houston. "It's depressing."

Some people are placing the blame on companies for using inflation as a cover to raise prices beyond the amount they need to cover their own higher costs.

"I feel the inflation pain every day," Susana Hazard told AP. "Every day, everything is going up and up, more than inflation－they're price-adjusting. Because even if inflation doesn't happen, they've raised the prices."

A May poll from Pew Research found that 70 percent of respondents considered inflation to be a "very big problem". The same poll said that many believed inflation to be the top problem facing the country.

In a statement on Wednesday, US Senator Joe Manchin, a West Virginia Democrat who has opposed some of the president's spending proposals, said: "It is time for us to work together to get unnecessary spending under control, produce more energy at home and take active and serious steps to address this record inflation that now poses a clear and present danger to our economy."

"Inflation makes everything difficult," Lara Rhame, chief US economist for FS Investments, told The Wall Street Journal. "It erodes your savings, your wages, your profits. It's punishing everybody."

Agencies and Xinhua contributed to this story.