As U.S. policymakers walk a tightrope in an attempt to dial back sky-high prices while averting an economic recession, the release of new inflation data Wednesday is expected to show a continued acceleration of price hikes.
The consumer price index, or CPI, is expected to show an increase of 8.8% year-over-year in June, the highest recorded figure in four decades and an uptick from where the metric stood a month prior, according to a Bloomberg survey of economists.
The new data will arrive as the Federal Reserve pursues a series of rate hikes that aim to tackle inflation by slowing down the economy and slashing demand. All the while, the moves risk tipping the economy into a recession.
A high inflation figure could spur the Fed to seek a more aggressive approach to raising interest rates. The new inflation data comes days after employment data showed stronger than expected hiring last month, suggesting that employers remain undeterred by borrowing cost increases from the Fed.
“The million dollar question is how hard the Fed has to apply the brakes,” Hernan Moscoso Boedo, an economist at the University of Cincinnati, told ABC News.
White House press secretary Karine Jean-Pierre talks to reporters during the daily news conference in the Brady Press Briefing Room at the White House on July 11, 2022, in Washington, D.C.
Chip Somodevilla/Getty Images, FILE
“If we see a higher inflation rate, it will put more pressure on the Fed to increase the interest rate more than expected, and that increases the possibility that the U.S. is going to enter a recession,” Moscoso Boedo added.
Anticipating an eye-popping report, the White House on Monday warned observers of “highly elevated” inflation data largely on account of high gas prices in June.
“Gas and food prices continue to be heavily impacted by the war in Ukraine,” White House press secretary Karine Jean-Pierre told reporters on Monday, calling the report “out of date” since gas prices have declined since last month. Over the past month, the national average gas price has decreased about 35 cents, reaching $4.65, according to data from AAA.
Federal Reserve Chair Jerome Powell reacts as he testifies before a Senate Banking, Housing, and Urban Affairs Committee hearing on Capitol Hill in Washington, D.C., June 22, 2022.
Elizabeth Frantz/Reuters, FILE
At a Fed meeting last month, just days after the release of inflation data for May, the central bank raised its benchmark interest rate 0.75%, its largest rate hike since 1994. The increase brought the interest rate to a range of 1.5% to 1.75%
At a meeting later this month, the Fed is expected to raise the interest rate again. Fed officials are considering a 0.50% or 0.75% hike at the next meeting, according to minutes from the past meeting that were released July 6.