As inflation hits 9.1%, bigger rate hikes are possible, economists say
HOUSTON - Inflation hit 9.1% in June, and you may be wondering why inflation continues to climb after the Fed has been raising interest rates to curb it since March.
"It’s worrisome. It’s been reported that’s a 40-year-high," said Dr. John Diamond, Director of the Center for Public Finance at Rice University's Baker Institute for Public Policy.
Inflation rose once again, despite the Fed raising interest rates three times this year for a total of a 1.5% increase.
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So why is inflation still rising?
"As much as the Fed can do, the Fed can’t control the global oil market. So this is another surge in gas prices. I think one-third of that 9% is attributable to gas, natural gas, heating and cooling costs, and gasoline," said Dr. Deitrich Vollrath, an economist with the University of Houston.
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Higher interest rates are credited with helping to cool the home and auto market slightly, and are expected to start slowing the rate of inflation this year.
"Probably the drift is down so that by the end of the year, inflation is more moderate. But I wouldn’t expect next month’s number to be one percent," said Vollrath.
"The risk the Fed faces is they want to get price increases under control, without throwing the economy into a complete tailspin or into a recession," said Diamond.
While many expected the Fed to hike the rate another .75% at the end of July, now analysts say it could be as much as a full 1%.
And as the Fed is expected to continue raising interest rates over the next couple of years, economists say that could increase our chances for a recession.
"Is that possible? Sure. Is it likely? I don’t know that it feels likely to me, given the other things going on. We see incredible strength in the labor market," said