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Prices rose more than expected in May

AILSA CHANG, HOST:

Inflation is not getting any better. In fact, it seems to be getting worse. Prices in May were up 8.6% from a year ago according to data released today by the Labor Department. That's the sharpest increase since 1981. People are having to shell out more for just about everything, including necessities like food and rent, and the average price of gasoline nationwide is closing in on $5 a gallon. It's already above that in many parts of the country, including here in LA.

NPR's Scott Horsley joins us now. Hey, Scott.

SCOTT HORSLEY, BYLINE: Hi, Ailsa.

CHANG: All right. So for a moment, it did look like the worst of all this inflation was behind us. But these new numbers obviously tell a different story. How are people you're talking to coping with these high prices?

HORSLEY: In some cases, they are becoming more careful shoppers. I spoke today to Jackie Upshaw. She's a retired Defense Department worker in Las Vegas. She told me there's no more impulse buying at the grocery store for her. She makes a list before she goes. She compares prices at several different stores. Upshaw also told me about commiserating with another customer in front of the refrigerator case when they saw what a dozen eggs are selling for these days.

JACKIE UPSHAW: The young lady was standing there. She was like, oh, my God. She said, the last time they was on sale, she said, I didn't want to have too many, but the next time I see them on sale, she said, I'm going to get a whole bunch of them. And I was like, oh, you too, sister? That's going to be me.

HORSLEY: Egg prices are up 32% over the last year. That reflects, in part, the rising cost of chicken feed and the culling of some laying flocks to the bird flu. But, you know, Ailsa, groceries overall are up more than 10%, so this inflation is widespread.

CHANG: Right. And meanwhile, we're going to hit another painful milestone at the gas pump, right?

HORSLEY: That's right. The average price of gasoline nationwide is within a couple pennies of that $5-a-gallon mark, and we're likely to cross that threshold this weekend. Just a year ago, gas was selling for a little over $3 a gallon. Gasoline prices have soared since Russia's invasion of Ukraine, and it's really taking a toll.

Ilan Blanck is a musician based in Boulder, Colo. He and his bandmates are planning a tour of the Midwest this summer, but he says they may have to cancel some of the more remote concerts because it's just too expensive to get there. And that's too bad because this was shaping up to be a pretty good summer for live music.

CHANG: Yeah.

ILAN BLANCK: Venues are booking and excited to book. A lot of festivals are back online, and it's just a real shame and a nail-biter that all the sudden, we have this new obstacle to deal with.

HORSLEY: Obviously, a lot of people are still traveling this summer, but airfares are way up, and so is the price of hotel rooms.

CHANG: Scott, can you just remind us, how did we wind up with such high inflation?

HORSLEY: You know, for much of last year, policymakers weren't really concerned about inflation. They were mostly worried about the economic fallout from the pandemic and getting people back to work. They thought if they did that, prices would come down on their own. But it turns out inflation's been a lot more stubborn, and, of course, the war in Ukraine has poured more gasoline on the fire.

This is really hurting President Biden's approval rating in a way that's likely to be costly for Democrats in the midterms. And unfortunately for the White House, there's not a whole lot that Biden can do about inflation. He has done something important, though, and that's to promise not to get in the way of the Federal Reserve as it works to bring prices under control.

CHANG: So how much longer do you think we're going to have to live with such huge price hikes?

HORSLEY: Well, it looks as though high inflation could be with us for a while. The Fed has started raising interest rates pretty aggressively in an effort to tamp down demand, but that's a process that takes time. And given how high inflation is already, the central bank may have to push interest rates higher than it otherwise would have. The concern is that in doing so, the Fed could tip the economy into recession, and that concern is definitely weighing on the stock market. All the major indexes were sharply down today, with the Dow tumbling nearly 900 points.

CHANG: Wow. That is NPR's Scott Horsley. Thank you, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.