US inflation surged to 9.1 percent in June, leading to fall in global stock markets and euro dipping below $1 for the first time in 20 years.
The 9.1 percent consumer price index rise from a year earlier is the largest gain on 12-month basis since the end of 1981. The Labour Department data showed inflation increasing 1.3 percent from May, the biggest monthly increase since September 2005. It had increased 1.0 percent last month.
A 7.5 percent surge in energy prices accounted for nearly half of the increase in the CPI. Gas prices increased 11.2 percent, but prices at the pump have declined considerably from June’s record highs.
With the markets expecting Fed to announce a rate hike in the region of 0.75-1 percent, S&P 500 finished down 0.5 percent and the European stock markets also ended lower. The euro fell below the $1 for the first time since December 2002 as dollar appeared more attractive to investors.
Both Dow and S&P 500 are expected to open more than 1.5 percent down on Thursday.
The Fed will decide on the possible hike on July 27, but Canada’s central bank already raised its lending rate to 2.5 percent on Wednesday.
The New Zealand and South Korean central banks also raised interest rates by 0.5 percentage points. It was the steepest increase by Seoul since 1999.
US President Joe Biden said the figures were “unacceptably high”, but added they were out of date given the recent drop in gas prices.
In a statement, Biden said: “Energy alone comprised nearly half of the monthly increase in inflation. Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices, that have reduced the price at the pump by about 40 cents since mid-June.”
AAA data showed fuel prices averaged above USD5 per gallon in June. They were averaging USD4.631 per gallon on Wednesday.
“Those savings are providing important breathing room for American families,” Biden added in the statement. “And, other commodities, like wheat, have fallen sharply since this report.”
Apart from the rising prices of gas, food, housing and healthcare, the June data also reflected higher prices for a range of other goods and services, including motor vehicles, clothing and household furniture.
Earlier, there were jitters in the market on Tuesday following an inflation data report that was later called ‘fake’ by the US Bureau of Labour Statistics.
The document claimed that the annual inflation in June reached 10.2 percent. However, the chart in the forged report did not match the text, and BLS tweeted: “We’re aware of a fake CPI release image circulating on Twitter. It is a fake. Stay tuned for the real CPI release tomorrow at 8:30 AM ET.”
US stocks dipped in mid-afternoon trade when the fake report started circulating. The S&P 500 index turned negative around 2pm ET and finally ended the day down 0.9 percent.
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