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The Commerce Department announced Friday that an inflation index that the Federal Reserve uses as a crucial benchmark jumped 3.5 percent in June, a strong increase that was nonetheless in line with Wall Street projections. At a time when the US economy is experiencing its strongest inflation pressures in more than a decade, the personal consumption expenditures price index, which excludes food and energy, was predicted to rise 3.6 percent.
This increase was slightly higher than the 3.4 percent increase in May and is the most since July 1991. Officials from the Federal Reserve have stated that they believe the inflation spike to be temporary, as it stems mostly from industries that are sensitive to the economic recovery, as well as supply chain bottlenecks and other concerns that are expected to fade. The central bank’s preferred inflation objective is 2%, though authorities are willing to tolerate higher levels in the short term while the economy attempts to return to full employment.
The core PCE index increased 0.4 percent month over month, falling short of the Dow Jones forecast of 0.6 percent, indicating that inflationary pressures are beginning to ease. Income grew 0.1 percent, beating the forecast of a 0.2 percent drop, while spending increased 1 percent, above the forecast of 0.7 percent.
Inflationary pressures on the job market have also increased. For the three months ended in June, compensation expenditures increased by 0.7 percent, while wages and salaries increased by 0.9 percent. According to separate Labor Department data released on Friday, compensation costs grew 2.9 percent this year, up from 2.7 percent the previous year.
In terms of price inflation, the PCE index, which includes food and energy, jumped 4% from a year ago, the highest increase since July 2008, right before the financial crisis reached its apex. Energy prices increased by 24.2 percent, while food prices increased by 0.9 percent.
Story By: Norvisi Mawunyegah