BALTIMORE — Investors are bracing themselves for the fallout from Friday's latest Consumer Price Index. The report shows inflation rose 8.6% in May.
It's the largest 12-month increase since December 1981.
Many financial analysts warn inflation is about to get worse before it gets better. Meanwhile, the Federal Reserve is taking painful steps to try and stop the U.S. economy from heading into a recession.
Allianz chief economic adviser Mohamed El-Erian said “I think you've got to be very modest about what we know about this inflation process. And I fear that it's still going to get worse. We may well get to 9% at this rate."
Out of control gas prices are driving the high rate of inflation not seen since Ronald Reagan's first year in the Oval Office.
The latest consumer price index shows inflation continues to climb. It now stands at 8.6%.
America's 40-year-high rate of inflation has been blamed on everything from a tight labor market to Covid and from Russia's war in Ukraine to government spending.
Grocery prices are up nearly 12% from a year ago. The largest spikes are for the costs of eggs, meat, and bread. It’s the highest increase on these basic food staples since 1979.
Gas prices nationwide now average more than $5 per gallon.
The Federal Reserve is expected to raise key interest rates by a half-point Wednesday.
Making it more expensive to borrow money is an effort to cool spending just enough to curb inflation but without sending the economy into a recession.
Some analysts expect interest rates could rise by three-quarters of a point in the months ahead.
Former Federal Reserve vice-chair Roger Ferguson said "maybe aggressively, maybe 50, 50 50, maybe even a 75 until we get inflation under control. And that means, frankly, risking the possibility of, as chairman Powell said, 'some pain.’”
Investors will have to wait until Wednesday to see exactly how much the Fed raises interest rates which not affects financial investors but can trickle down to everyday consumers.
If banks have to charge more to lend to other banks, the interest rates banks charge consumers on car loans, mortgages, and credit cards also go up.