Inflation surges by almost 6%

NEW YORK (CNNMoney.com) -- The annual inflation rate surged to 5.6% in July - the highest point since 17 years ago, when the Persian Gulf War was raging.

The previous month's reading on annual inflation was 5%.

The July increase matched the 5.6% level in January 1991, said David Wyss, chief economist for Standard & Poor's.

"It's obviously disturbing - it's a bad number," said Wyss.

On a monthly basis, the Consumer Price Index jumped by 0.8% in July. That is twice the increase that economists had expected.

The biggest culprit in driving up inflation was the cost of energy, which increased by 4% on a monthly basis and 29.3% annually.

Monthly food prices increased 0.9% and 8.4% annually. This is one of the greatest monthly increases of the year, matching the 0.9% increase in April.

The so-called core CPI, which excludes the volatile food and energy prices, increased to 2.5% annually and 0.3% on a monthly basis in July. Analysts had expected a monthly increase of 0.2%.

Wyss said that while energy prices have dropped dramatically in recent weeks, "this is a number that is going to make the Fed very concerned."