Inflation is getting harder for Fed to ignore

2 minute read

Federal Reserve Chair Jerome Powell testifies during a U.S. House Oversight and Reform Select Subcommittee hearing on coronavirus crisis, on Capitol Hill in Washington, June 22, 2021. Graeme Jennings/Pool via REUTERS

Register now for FREE unlimited access to

WASHINGTON, July 13 (Reuters Breakingviews) - Federal Reserve Chair Jerome Powell will find it increasingly difficult to disregard the current spike in inflation. Consumer prices rose 5.4% from a year earlier in June, the biggest annual increase in 13 years, the Labor Department said on Tuesday. True, there were particularly pronounced jumps in the price of certain items, like used cars: A 10.5% rise in secondhand vehicle prices from May made up about one-third of the overall monthly bump. But it’s not clear how quickly such pressures will fade . For example, electronics maker Flex (FLEX.O) said last month that chip shortages, which have caused a car supply crunch, will spill well into 2022. Food and energy are also on the rise as people emerge from Covid-related lockdowns read more .

This compounds pressure on the Fed to start reducing its $120-billion-a-month asset purchases to ensure inflation doesn’t become a blaze. A majority of the central bank’s rate-setting committee saw price risks at their June policy meeting but they didn’t say when they would react. Another month of inflation figures like these will force Powell to be more specific. (By Gina Chon)

On Twitter

Register now for FREE unlimited access to

Capital Calls - More concise insights on global finance:

Nokia hits high note without Reddit help read more

Distillers put rivalry aside for e-commerce push read more

Insurance dodges Olympic cancellation bullet read more

China’s D.C. lobbying undone by IPO crackdown L4N2OP0BL

Thai group shells out for Advent resins buyout read more

(This item has been corrected in the first paragraph to show the rise in vehicle prices was monthly.)

Register now for FREE unlimited access to
Editing by Swaha Pattanaik and Amanda Gomez

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at and follow us on Twitter @Breakingviews and at All opinions expressed are those of the authors.

More from Reuters