US prices rise 9.1 percent in June, fastest increase since 1981

The Bureau of Labor Statistics' Consumer Price Index (CPI) has accelerated 9.1 percent from a year ago, setting a new 40-year high. This new record smashes May's CPI of 8.6 percent, which was the previous highest score since 1981.

The prices of common items and bills such as food, gas, and rent are among the sharpest increases. The soaring prices that Americans are seeing for the first time since the recession of the early 1980's is proving to be major trouble for the Federal Reserve.

Food prices continue to be hit hard by the massive inflation, rising 10.4 percent in the year leading up to June, the biggest annual increase since 1981. The cost of meals in the home went up 12.2 percent, while the cost of eating outside the home rose 7.7 percent.

Founder and CEO of investment firm Compound Capital Investments, Charlie Bilello, shared some of the shocking price increases from the report on Twitter.

While food is skyrocketing, the cost of rent and prices of homes are the biggest factors contributing to the CPI report, at 33% of the index. According to Bilello, this is indicative of the level of inflation being much higher than what is currently being reported.

The core index, which strips out volatile food and fuel, climbed 0.7 percent in June from May. That is a pickup from 0.6 percent in the previous month. During a time when the central bank is looking for sustained month-to-month slowdowns, this is not good.

"It’s not good news," said Kathy Jones, chief fixed income strategist at Schwab Center for Financial Research to The New York Times. "We had hoped to see a little month to month easing in the core rate," she said, adding "we don’t have much of a break here."

"We now understand better how little we understand about inflation," Jerome H. Powell, the chair of the Federal Reserve, said on a recent panel in Sintra, Portugal.

Central bankers are worried that as inflation gets worse, consumers and businesses might get used to it. If workers begin to ask for higher wages due to the increase of living expenses, companies could try to pass their swelling labor costs along to customers by raising prices. Thus the cycle continues, making the problem tricker for the Fed to tackle.

June's inflation report is "not the print that the Fed wants to see," said Brett Ryan, senior US Economist at Deutsche Bank to the Times, explaining that it "definitely raises the risk of recession" and will likely lead to another serious interest rate increase this month. "The Fed is going to have to slow the economy materially and in a much faster fashion than if inflation was lower or at least starting to respond," Ryan said.

Biden administration officials tried to get out in front of today's CPI report with a memo released earlier this week stating "core inflation has shown some signs of easing," despite the clear acceleration.