U.S. inflation rose at the fastest rate in 13 years in June, adding fuel to the debate over whether the surge in prices this year is only temporary.

The Labor Department reported Tuesday that the consumer price index increased 5.4% from a year earlier, the largest jump since August 2008. Economists surveyed by Dow Jones had been expecting a 5% gain.

Fed officials have conceded that “upside risks” have increased but still see the price surge as a temporary phenomenon as the economy emerges from the Covid-19 pandemic.

Accelerating prices for new and used cars and gains in prices for lodging and transportation services accounted for the vast majority of the core CPI increase in June. The price index has also looked artificially high this year compared to very weak readings during the pandemic in 2020, a data quirk that is beginning to fade.

“We expect the month-to-month core CPI numbers to moderate over the summer, before slowing more sharply in the fall if, as we expect, used car prices drop sharply,” Ian Shepherdson at Pantheon Macroeconomics wrote in a research note.

Nevertheless, The New York Times said, “June’s big inflation number will ramp up scrutiny of price-related data in the months ahead as policymakers assess whether the economy is at greater risk of overheating.”

“Is the ‘transitory’ debate over?” asked senior economist Jennifer Lee of BMO Capital Markets. “The answer is no, the transitory debate is far from over. In fact, it got a little hotter.”

The cost of used vehicles soared a record 10.5% in June following gains of 7.3% in May and 10% in April. “Economists think those price gains should begin to moderate as overall car production picks up and as car rental companies stop snapping up older vehicles in a bid to bolster their fleets,” the Times said.

But Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said the distortions from a semiconductor shortage and post-reopening disruptions, though ultimately temporary, may persist throughout the rest of the year and that could make it harder for the Fed to keep interest rates at near zero.

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