Consumers continued to pay more for new cars, food, and shelter. But even stripping out volatile categories like food and energy, prices jumped more than expected, by 0.6%. Prices for used cars and apparel, meanwhile, fell.

What’s causing inflation?

Current inflation is in large part a reflection of the lack of US investment in key areas, Alex Williams, with labor advocacy group Employ America, wrote in a blog post. For instance, the incentive to invest in semiconductors hasn’t been there since the dot com crash. In this sense, the US doesn’t need more workers, but more chip production capacity.

“To increase productive capacity requires time and substantial investment, not an increase in sectors that rely on semiconductors for intermediate goods,” Williams wrote.

The same logic applies to rents, which will continue to rise throughout the year because there aren’t enough units. According to the National Association of Renters, the US has under-built by 5.5 million to 6.8 million units in the past 20 years.

What can the government do to stop inflation?

The US Federal Reserve’s rate hikes are already increasing borrowing costs. Mortgage rates shot up to 5.27% in May from 3.2% in January, which should help curb real-estate prices. “New and existing home sales are expected to decline at low-to-mid-single-digit rates in 2022, versus our previous forecast of flat to slightly up,” Fitch Ratings said on Tuesday.

Meanwhile, the Biden administration has been taking measures to lower gasoline prices. On Tuesday, it said this summer Americans will be able to pump E15, which is usually banned during that time of year. The fuel is more polluting than regular gasoline, but cheaper. Back March, Joe Biden announced the US would release 180 million barrels of oil over the next 6 months. That’s equal to about 1% of global oil supply and 10% of US oil production.

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