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US inflation hit 9.1% in June to put further pressure on Fed

US inflation hit 9.1% in June to put further pressure on Fed

US consumer prices rose more than forecast in June, hitting an annual pace of 9.1 per cent, a 40-year high that cements expectations of a historically large 0.75 percentage point Federal Reserve interest rate rise this month.

The consumer price index published by the Bureau of Labor Statistics on Wednesday further accelerated in June, above economists’ estimates for an 8.8 per cent increase. It marked the fastest year-over-year increase since November 1981.

Once volatile items like food and energy are stripped out, “core” inflation increased 0.7 per cent, compared with May’s 0.6 per cent advance. That translated to an annual increase of 5.9 per cent, roughly in line with the 6 per cent pace reported the month earlier.

The data will spur the US central bank’s efforts to restore price stability, which dramatically intensified last month after officials abandoned previously-laid plans to deliver a half-point rate rise and instead implemented the first 0.75 percentage point increase since 1994.

Policymakers have also signalled their intent to raise rates to a level — estimated to be around 3.5 per cent — that begins to restrain economic activity by the end of the year. They are seeking to maintain an aggressive approach to tightening monetary policy until there is evidence that monthly inflation readings are decelerating towards a pace more consistent with the Fed’s 2 per cent target.

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