US Consumers Hit With Third Straight Month of Rising Prices, Biggest Year Spike Since 2008

U.S. consumers saw a third consecutive month of rising prices in June, marking the biggest inflation spike in one year since June of 2008, the Associated Press reported.

A higher demand for certain products and services as the economy reopens, despite many of those goods and services remaining in low supply, is behind the surge in prices.

Consumer prices grew 0.9 percent in June and 5.4 percent over the past year, according to a Labor Department report released Tuesday. With the exception of oil and gas prices, core inflation saw a 4.5 percent increase over the past year. as well, surpassing the previous 12-month increase high in November of 1991, AP reported.

The rise in inflation has raised concerns that the Federal Reserve may start rescinding its low-interest rate policies sooner than anticipated. This could potentially undermine the economy's recovery from the pandemic recession, although Fed officials have said on multiple occasions that they recognize the inflation spike as an interim effect of heightened demand and low supply, AP reported.

For more reporting from the Associated Press, see below.

The economy's reopening has led consumers to increasingly travel, dine out and shop after avoiding crowds for a year. That burst of spending has forced up prices for restaurant meals, clothes and airplane tickets. A shortage of semiconductors has made new and used cars much more expensive, and rental car prices have soared.

So far, investors have largely accepted the Fed's belief that higher inflation will be short-lived, with bond yields signaling that inflation concerns on Wall Street are fading. Bond investors now expect inflation to average 2.4 percent over the next five years, down from 2.7 percent in mid-May.

Americans' longer-term views on inflation have also leveled off. A survey by the Federal Reserve Bank of New York, released Monday, found that consumers expect inflation to remain near 5 percent a year from now. But they expect inflation to be 3.5 percent three years from now, down slightly from last month. Consumers typically overestimate future inflation.

The public's expectations of inflation are important, because they can be self-fulfilling. If consumers foresee higher prices, they are likely to demand higher pay, and businesses will try to charge more to offset their higher costs.

The Fed is aiming for inflation to exceed its target of 2 percent for some time to make up for the fact that inflation fell below that level for most of the past decade. The Fed wants inflation to average 2 percent over time to prevent Americans' inflation expectations from falling too low.