U.S. Inflation Rate Hits 8.6% In May 2022, Highest In 40 Years

Gas, food, and most other goods and services all increased in price in May, pushing inflation to a new four-decade high and leaving American households with no relief from rising prices.

Photo Insert: Food, energy, rent, airline tickets, and new and used cars all saw significant price increases.

Consumer prices rose 8.6 percent year on year in May, faster than the 8.3 percent increase in April, according to the Labor Department, Christopher Rugaber reported for the Associated Press (AP).

The new inflation figure, the highest yearly increase since December 1981, will put additional pressure on the Federal Reserve to continue aggressively raising interest rates.

Prices increased by 1% month over month from April to May, far outpacing the 0.3 percent increase from March to April. Food, energy, rent, airline tickets, and new and used cars all saw significant price increases.

The widespread price increases also raised "core" inflation, which excludes volatile food and energy prices. Core prices rose 0.6 percent in May for the second month in a row, and are now 6 percent higher than a year ago.

America's rampant inflation is putting severe strains on families, forcing them to pay significantly more for food, gas, and rent while reducing their ability to afford discretionary items such as haircuts and electronics.

Lower-income and Black and Hispanic Americans, in particular, are struggling because necessities consume a larger proportion of their income on average.

Some evidence in recent weeks had suggested that inflation might be moderating, particularly for long-lasting goods that were caught up in supply chain snarls and shortages last year. However, that trend appeared to reverse itself in May, with used car prices rising 1.8 percent after falling for three months in a row.

New car prices rose as well, as auto production remained hampered by semiconductor shortages. And clothing prices are rising after falling in April.

Given Friday's inflation reading, the Fed is almost certain to carry out the fastest series of interest rate increases in three decades. The Fed hopes that by sharply raising borrowing costs, it will be able to cool spending and growth enough to keep inflation under control without tipping the economy into a recession.

It will be a difficult balancing act for the central bank. The Fed has indicated that it will raise its key short-term interest rate by a half-point next week and again in July. Some investors expected the Fed to reduce its rate hikes to a quarter-point increase when it meets in September, or even pause its credit tightening.

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