The U.S. Bureau of Labor Statistics today reported an increase in the CPI of 8.6% for the year in May, a larger rate of inflation than from April 2021 to April 2022, and the largest annual increase since 1981. Energy costs are up 34.1% for the year and food costs up 10.1% according to the report; both of these are significant accelerations in inflation since April.
The reported increase in shelter costs continues to rise month to month, 5.5% in May, but still nowhere near reality and therefore causing the report to underestimate inflation on that score alone.
Financial analysts trumpeted that the (unsurprising) inflation news means that the Fed will have to raise interest rates not just in June and July, but again in September, and U.S. financial markets went into a twitter.
By contrast, in Russia, whose economy was supposed to have been destroyed by now by Western economic sanctions, the Bank of Russia central bank announced it had reduced its discount rate from 11% to 9.5%. The bank reported that inflation has moderated slightly in May and early June (to about 17.1%), and “overall, the actual decrease in economic activity in 2022 Q2 is less pronounced than the Bank of Russia assumed in its April baseline scenario. [It] estimates that the 2022 GDP decline could be lower than forecast in April,” which was about −6%. It also said it was taking into account the “economic transformation process” occurring in the Russian economy. The ruble remained above 60/dollar and rose slightly.
