US inflation has soared to the fastest annual rate since the financial crisis, fuelling worries that the world’s top economy is running hot.
Consumer prices rose 5pc year-on-year in May, beating economists’ expectations for a reading of 4.7pc. The index of prices climbed 0.6pc between April and May, also slightly ahead of estimates.
The core CPI reading – which strips out volatile factors including energy and food – rose 3.8pc year-on-year, the fastest rate since the early Nineties.
The rapid rise in prices has sparked fears that the US economy may be trapped in an inflationary spiral, as supply bottlenecks and worker shortages push up prices and wages at the same time.
The figure has also been boosted by so-called base effects; weak inflation a year ago makes price rises now even more stark. Several other factors including a strong rise in prices for used cars have also underpinned the gains.
Andrew Hunter at Capital Economics said the rise was “again driven mainly by the same handful of categories most directly affected by the lifting of virus restrictions”.
But he added that there were “signs of emerging inflationary pressures in other sectors, including housing costs and restaurant prices, which suggests that not all of the current upward pressure on inflation will prove transitory”.
It came as the European Central Bank kept its foot to the floor on stimulus efforts, shrugging off worries that a similar rise in inflation could befall the Eurozone as it recovers from the pandemic.
The central bank raised its forecasts for growth and price inflation in the bloc, but ignored calls from some EU officials to slow down its bond-buying efforts.
President Christine Lagarde said inflation was expected to continue rising through 2021, but that a rise in prices should tail off next year.