The economy is growing rapidly, but there’s a big mismatch between how much customers want to buy and how much businesses can produce. That yawning divide is what’s triggered the surge in inflation.
The numbers: Inflation in the U.S. rose sharply again in June and the increase over the past year remained at a 13-year high, raising the cost of living for consumers and casting a shadow over a strong economic recovery.It was the fourth big upturn in a row and kept the increase over the past 12 months at 4%. That’s the highest level since 2008 and double the Federal Reserve’s 2% target.
Adding to the problem is a surprising shortage of labor. Millions of people still haven’t returned to work even with job openings at a record high. Some companies have had to boost wages or reduce hours to cope with the labor shortage.The Federal Reserve has said for months inflation would subside as the bottlenecks eased and the central bank is sticking to that view.
The increase over the past 12 months crept up to 3.5% from 3.4%, but it appears to show signs of moderating. The core measure is viewed by the Fed as a better indicator of underlying inflation.
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