The euro fell below parity against the dollar for the first time in almost two decades after the announcement that US inflation had reached 9.1% in June.
The figures will put further pressure on the Federal Reserve to raise interest rates by 75 basis points later this month, as raising interest rates is one of the tools used by banks central to fighting inflation.
The 9.1% rise – the highest level in 40 years – is compared to the same month last year, and is up from the 8.6% jump seen in May.
Month-over-month, prices rose 1.3% from May to June, after rising 1% from April to May.
Richard Carter, head of fixed rate research at Quilter Cheviot, said: “This disappointment means that a 0.75% hike from the Federal Reserve at their next meeting is an absolute certainty and there may even be pressure from certain quarters to do more.
“Central banks are clearly struggling to get inflation under control and if that number continues to grow or hover around that level, it will take more to bring it down, whatever economic consequences that might have.
“Markets are likely to remain volatile in this environment, although the fall in the price of oil in recent days gives hope that inflationary pressures will start to ease later in the year.
“However, there must be signs soon that this will translate into the rate of inflation.”
Concerns for Biden ahead of November election
Grocery prices are up 12.2% from a year ago – the biggest increase since 1979 – while rents are up 5.8%, new car prices are up 11.4% and air fares increased by 34%.
The effect on American consumers has hurt President Joe Biden’s approval rating and poses a big threat to his Democratic Party ahead of November’s congressional election.
Some 40% of adults polled in June in an AP-NORC poll said tackling inflation should be a top government priority this year – just 14% said so in December.
Could inflation peak in the short term?
Despite all this, some economists believe that inflation could reach – or at least approach – a peak in the short term.
Fuel prices have fallen slightly, although they are still much higher than a year ago.
Shipping costs have started to drop as the two major western ports in the United States – Los Angeles and Long Beach – begin to take over the backlog of ships.
Commodity prices are also starting to fall – oil fell to around $96 a barrel on Tuesday, while prices for metals like copper are falling on recession fears in the United States and Europe.