US records 9.1% inflation in June, highest since 1981

US inflation has surged to a new four-decade high in June because of rising prices for gas, food and rent, squeezing household budgets and pressuring the Federal Reserve to raise interest rates aggressively — trends that raise the risk of a recession.

The government’s consumer price index soared 9.1 percent over the past year, the highest yearly increase since 1981, with nearly half of the increase due to higher energy costs, government data showed on Wednesday. 

Lower-income and Black and Hispanic Americans have been hit especially hard since a disproportionate share of their income goes toward essentials such as transportation, housing and food. 

But with the cost of many goods and services rising faster than average incomes, a vast majority of Americans are feeling the pinch in their daily routines.

"Everything goes up, including cheaper items like store brands," said 72-year-old Marcia Freeman, who lives off of a pension and visited a food bank near Atlanta this week to try and gain control of her grocery costs. 

Grocery prices have jumped 12 percent in the past year, the steepest climb since 1979.

Accelerating inflation is a vexing problem for the Federal Reserve, too. 

The Fed is already engaged in the fastest series of interest rate hikes in three decades, which it hopes will cool inflation by tamping down borrowing and spending by consumers and businesses.

The US economy shrank in the first three months of the year, and many analysts believe the trend continued in the second quarter.

"The Fed's rate hikes are doing what they are supposed to do, which is kill off demand," said Megan Greene, global chief economist at the Kroll Institute. 

"The trick is if they kill off too much and we get a recession."

READ MORE: US Fed makes biggest rate hike in over two decades to tame record inflation

Over 70M pushed into poverty

After years of low prices, a swift rebound from the 2020 pandemic recession — combined with supply-chain snags — ignited inflation.

The year-over-year leap in consumer prices last month followed an 8.6 percent annual jump in May. From May to June, prices rose 1.3 percent, following a 1 percent increase from April to May.

Some economists believe inflation might be reaching a short-term peak. 

Gas prices, for example, have fallen from the eye-watering $5 a gallon reached in mid-June to an average of $4.63 nationwide on Wednesday — still far higher than a year ago.

Shipping costs and commodity prices have also begun to fall, and pay increases have slowed. 

Surveys show that Americans' expectations for inflation over the long run have eased — a trend that often points to more moderate price increases over time.

Housing and rental costs are rising steadily as solid job gains encourage more Americans to move out on their own. Rents have risen 5.8 percent compared with a year ago, the most since 1986.

The biggest shock has been energy prices, which soared 7.5 percent just from May to June. Gas prices have skyrocketed nearly 60 percent compared with a year ago.

Inflation is surging well beyond the United States, with 71 million people pushed into poverty in the three months after Russia attacked Ukraine, the UN Development Program said last week.

READ MORE: JP Morgan sees 42% decline in profits due to inflation, Ukraine conflict