US inflation hits highest rate in four decades at 8.6 per cent over the past year

US inflation has hit its highest rate in four decades at 8.6 per cent over the last year.

The Labor Department reported the record consumer price index (CPI) figure on Friday morning after Americans weathered another month of soaring costs for gas, food and other necessities in May.

The rate - which marked the highest since December 1981 - surpassed predictions from Dow Jones economists, who expected an overall CPI jump of 8.3 per cent last month compared with a year earlier, according to data provider FactSet.

It comes after an 8.3 percent year-over-year surge in April and 8.5 per cent increase in March, which was the most since 1982.

Month to month, the headline CPI rose 1 per cent, above the Dow Jones estimate of 0.7 percent.

The acceleration has been attributed primarily to gas prices, which had declined in April but leaped more than 10 per cent in May alone and have since reached an average of nearly $5 a gallon nationwide. Shelter also jumped by 0.6 per cent last month, the largest increase since March 2004. Airline fares rose 12.6 per cent in May after they rose 18.6 per cent in April.

America’s rampant inflation is imposing severe financial pressures on families, forcing them to pay much more for such items as food, gas and rent and reducing their ability to afford discretionary items, from haircuts to entertainment. Lower-income and Black and Hispanic Americans, in particular, are struggling because, on average, a larger proportion of their income is consumed by necessities.

High inflation has also forced the Federal Reserve into what will likely be the fastest series of interest rate hikes in three decades. By raising borrowing costs aggressively, the Fed hopes to cool spending and growth enough to curb inflation without tipping the economy into a recession. For the Fed, it will be a difficult balancing act.

Surveys show that Americans regard high inflation as the nation’s top problem, and a substantial majority disapprove of President Joe Biden’s handling of the economy. Last week, amid the news that the US economy added 390,000 jobs in May, he said that the country was in a better position to fight inflation.

““I know that even with today’s good news, a lot of Americans remain anxious, and I understand the feeling”, he said. “Because of the enormous progress that we’ve made on the economy, Americans can tackle inflation from a position of strength.”

Mr Biden has said that United States economy’s transition from robust growth while recovering from the Covid-19 pandemic to more stable growth should lead to some moderation in prices.

Congressional Republicans are hammering Democrats on the issue in the run-up to the fall midterm elections. House Republicans criticsed the select committee investigating January 6 for hosting a prime time hearing on Thursday while saying that Democrats were not adequately focused on inflation.

Associated Press contributed to this report