- A report this week from the United States Department of Labor showed the largest consumer prices increase in nearly 40 years as inflation soars
- The Consumer Price Index (CPI) increased 7 per cent year-on-year through to the end of December — the biggest single-year increase since the early 1980s
- While petrol prices have copped some of the biggest increases, US consumers are also paying more for the likes of food, rent, furniture, and cars
- President Joe Biden says his administration “more work to do” with prices remaining so high, though he claims the government is making progress in slowing the rate of inflation
- The US Federal Reserve in December flagged three quarter-percentage interest rate increases for 2022 among other measures as it fights to bring inflation under control
A report this week from the United States Department of Labor showed the largest consumer prices increase in nearly 40 years as inflation soars.
The Consumer Price Index (CPI) increased 7 per cent year-on-year through to the end of December — the biggest single-year increase since the early 1980s and significantly above the Federal Reserve’s target of 2 per cent inflation.
Major supply shortages driven by the COVID-19 pandemic are largely to blame for the price hikes, with the Fed flagging three quarter-percentage interest rate increases for 2022 as it fights to bring inflation under control.
Petrol prices have copped some of the biggest gains over the past year, increasing by 6 per cent in both November and October, though US consumers are also paying more for the likes of food, rent, furniture, and cars.
According to the Labor Department, rising inflation is also eroding wage gains, with inflation-adjusted average weekly earnings down 2.3 per cent year-on-year in December.
This all comes even as the United States approaches full employment, with Labor Department data from last Friday pegging unemployment at a 22-month low of 3.9 per cent.
However, Federal Reserve Chair Jerome Powell said this week the jobs market needed inflation to be under control because “you’re not going to have maximum employment without price stability”.
The remark came as the central bank said it was ready to do whatever was needed to keep high inflation from becoming “entrenched”.
Federal Reserve officials were seemingly caught off guard by the ongoing inflation, with Mr Powell last year diagnosing rising prices as “transitory”, expecting them to ease far more quickly than they have.
The latest expectations are for inflation to peak in mid-2022 before reversing, though prices throughout the year are likely to remain higher than their pre-pandemic levels.
This means the US central bank faces the delicate task of doing what it can to control inflation but not tightening monetary policy aggressively enough to cause a recession.
Meanwhile, President Joe Biden — whose approval rating has taken a hit in light of ongoing supply chain issues and high costs of living — admitted this week that his administration still has “more work to do” with prices remaining so high.
“This report underscores that we still have more work to do, with price increases still too high and squeezing family budgets,” President Biden said in a statement.
He added, however, that the White House was “making progress” in slowing the rate of price increases.