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| Version 0 | Version 1 |
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| US inflation rate at 26-year high | US inflation rate at 26-year high |
| (about 1 hour later) | |
| US inflation accelerated at the fastest rate in 26 years in June, fuelled higher by surging energy prices, official figures have shown. | |
| Consumer prices rose by 1.1% in June, the Labor Department said, more than the 0.7% many analysts had expected. | Consumer prices rose by 1.1% in June, the Labor Department said, more than the 0.7% many analysts had expected. |
| Federal Reserve boss Ben Bernanke said on Tuesday that the threat of rising inflation had intensified recently. | |
| High inflation will make it harder for the Fed to cut rates and boost an economy hurt by a housing market slump. | High inflation will make it harder for the Fed to cut rates and boost an economy hurt by a housing market slump. |
| 'Fed in a hole' | |
| The Fed chairman, who faces his second day of congressional testimony on Wednesday, also warned about the "downside" risks to growth in the world's largest economy. | |
| There is so much uncertainty in the market right now that news of higher inflation doesn't mean a rise in interest rates Stephen Malyon, Scotia Capital | |
| Many analysts now believe that the central bank may have to leave borrowing costs on hold as it tries to steer a faltering economy through turbulent times. | |
| "There is so much uncertainty in the market right now that news of higher inflation doesn't mean a rise in interest rates," said Stephen Malyon, analyst at Scotia Capital in Toronto. | |
| The US faces a severe housing slump, a credit crunch and financial market turmoil stemming from the collapse of the sub-prime mortgage market. | |
| The impact of surging living costs in June "really puts the Fed in a hole," said Alan Ruskin, an economist at RBS Greenwich. | |
| Gary Thayer of Wachovia Securities agreed that the Fed was facing a tricky balancing act. | Gary Thayer of Wachovia Securities agreed that the Fed was facing a tricky balancing act. |
| "This increases concern that the Fed is not going to be able to lower interest rates if the economy remains weak," he explained. | "This increases concern that the Fed is not going to be able to lower interest rates if the economy remains weak," he explained. |
| "And as long as the economy remains weak, it will be hard for the Fed to raise rates to fight inflation." | "And as long as the economy remains weak, it will be hard for the Fed to raise rates to fight inflation." |
| On annual basis, prices were 5% higher when compared with June 2007, the Labor Department said. | On annual basis, prices were 5% higher when compared with June 2007, the Labor Department said. |
| Energy surge | |
| Energy prices were the main driver of price growth, and were 6.6% higher in June as the cost of petrol, natural gas and heating oil increased. | Energy prices were the main driver of price growth, and were 6.6% higher in June as the cost of petrol, natural gas and heating oil increased. |
| Expectations that that a slowing US economy will dampen demand for oil helped crude prices drop 42 cents to $138.32 in pre-market trade in New York. | |
| The annual core inflation rate, which strips out volatile fuel and food prices, was 2.4%. | |
| The surge in living costs has also dented the earning power of Americans. | |
| Average weekly wages, after adjusting for inflation, fell by 0.9% in June - the biggest monthly decline in 24 years, the Department said. |