US Inflation is Rising Much Faster Than Expected

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Inflation in the United States rose much faster than expected in April, driven in part by the economic recovery from the corona crisis and higher commodity prices.

 

Rising inflation may prompt the Federal Reserve, the US umbrella organization of central banks, to increase interest rates more quickly to avoid overheating the economy.

Inflation was up 0.8 percent compared to March when it rose 0.6 percent. That is the most substantial increase since 2009. Economists had generally expected a rise of 0.2 percent every month. On an annual basis, consumer prices in the world’s largest economy jumped 4.2 percent.

A year earlier, inflation was still strongly depressed by the corona crisis, causing oil prices to drop sharply and other products and services also becoming less expensive due to weaker demand.

Thanks to the enormous support packages from the US government and the improving labour market, the economic recovery also pushes up wages. Shortages of parts also lead to higher costs. Those costs are then passed on to customers and buyers, which also causes rising inflation.

The Fed has said that the effect of higher inflation is likely to be temporary and that monetary policy has not yet been tampered with.

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