President Joe Biden blames Vladimir Putin’s ‘tax’, profiteering for 40-year inflation high

Joe Biden blames Vladimir Putin, energy profiteering, as inflation hits a new 40-year high.

President Joe Biden speaking in Los Angeles, where he hosted Latin American leaders for a conference. Picture: Getty Images/AFP

President Joe Biden has blamed Russian leader Vladimir Putin and profiteering foreign companies for an unexpected increase in US inflation.

Soaring energy and food prices pushed US inflation to a new 40-year high of 8.6 per cent in May, putting pressure on the Federal Reserve to lift interest rates more aggressively.

The high, up from 8.4 per cent in April, defied expectations among most economists, and hopes in the White House, that the headline inflation rate would begin to fall as interest rates rose and economic activity slowed.

“We’ve never seen anything like Putin’s tax on both food and gas,” President Biden said on Friday (Saturday AEST), seeking also to blame the sustained surge in US inflation, which has been above 8 per cent for three months in a row, on the nine largest companies that ship goods from Asia to the US.

“These companies have raised their prices by as much as 1000 per cent … That’s why I call on Congress to crack down on foreign-owned shipping companies that raised their prices while raking in $190 billion in profit,” Mr Biden said, speaking in Los Angeles, where he hosted Latin American leaders for a conference.

Days before the Federal Reserve is set to lift the US official interest rate 0.5 percentage points for the second time in a row, the Bureau of Labor Statistics on Friday said “core inflation”, which excludes food and energy prices, was 0.6 per cent in May, the same high level as in April.

The price of shelter, which includes rents, rose 0.6 per cent to finish the one-year period 5.5 per cent higher, the biggest annual increase since February 1991, and further evidence inflation was spreading to services unrelated to the price of energy.

“Every country in the world is getting a big bite and piece of this inflation worse than we are,” Mr Biden said, promising he would do “everything in my power” to reduce it.

“Inflation outside of energy and food moderated in the last two months … it’s gone down, but not enough, we need it to come down much more quickly,” he said.

The Federal Reserve in recent statements by senior officials has all but guaranteed it will lift the official interest rate by 0.5 percentage points at each of its June (next week) and July meetings, which would leave the federal funds rate at 2 per cent.

“We think the US central bank now has good reason to surprise markets by hiking more aggressively,” said Jonathan Miller, a Barclays interest rate strategist, pencilling in a 0.75 percentage point hike for next week, when the Federal Reserve interest rate setting committee next meets.

Food prices rose 1 per cent over the month to finish the year almost 12 per cent higher, the largest increase since 1979, including a 32 per cent increase in the price of eggs.

“The massive surge in inflation – which has seen wages continue to decline in real terms with skyrocketing prices for food, fuel and other essentials – is taking a huge toll on confidence,” said Andrew Hunter, senior economist at Capital Economics.

Separately, consumer confidence dropped sharply in early June – according to the preliminary reading of the University of Michigan’s closely watched national confidence gauge – to the lowest reading in 50 years.

The benchmark S&P500 share market index dropped more than 2.5 per cent on the news, which comes amid a sharp decline in consumer confidence and growing fears the US will enter recession if interest rates rise quickly.

Over the 12 months to May the index for fuel oil has increased almost 107 per cent, the biggest annual increase since 1935, the Bureau of Labor Statistics said.

“Exxon made more money than god this year,” Mr Biden also said, referring to US oil giant Exxon, which he said was not increasing the supply of oil in order to keep prices high.

High inflation has eroded the standing of the president and the Democrat Party in public opinion polls in the lead-up to November midterm elections for Congress.

The high inflation reading comes as central banks across developed nations move to lift interest rates to stop high inflation becoming entrenched.

The Reserve Bank of Australia lifted the cash rate by 0.5 percentage points last week, the biggest increase since 2000. The Bank of England is expected to lift its official rate 0.25 percentage points next week.