US consumer prices, widely expected to be flattening, have surprised for the second consecutive month with a larger than expected monthly increase of 1.3% in June.
Compared to last year, prices were 9.1% higher – the highest inflation rate in 40 years.
Price increases were broad-based with gasoline, housing and food being the largest contributors, the US Bureau of Labor Statistics reported Wednesday.
Core inflation, excluding the more volatile energy and food indices, increased by 0.7% last month, up from 0.6% in May, and by 5.9% over the past 12 months.
High US inflation has an effect on the Cayman Islands, because it is the source market for about 83% of Cayman’s imports.
June’s 12.2% annual food price increase in the US can already be felt in local grocery stores. And the 11.2% gas price index jump in America, just last month alone, is reflected by rising gas prices on island.
In addition, high inflation is likely to induce the US Federal Reserve to keep raising interest rates, which in turn will impact the cost of borrowing, through consumer loans, mortgages and credit card debt, on island.
To prevent inflation from going even higher, the US central bank has indicated that it may decide on another 0.75% interest rate hike at a meeting later this month, followed by several more incremental rises until the end of the year.
Current inflation levels are far off the Fed’s 2% target. But a more aggressive stance on interest rates will also have a dampening effect on the economy, which contributes to growing concern about a possible recession, not just in the United States, but globally.
Cayman inflation hit 11.2% in the first quarter of this year, almost reaching the historic peak of 11.4% post-Hurricane Ivan.
Related Videos
