In nearly four decades, inflation rose at the fastest pace, as rapid price gains fueled consumers’ fears about the economy and sent President Biden’s approval rating tumbling.
According to a new Labor Department report released Wednesday, the consumer price index rose 7% in December from a year ago, marking the fastest increase since June 1982, when inflation hit 7.1%.
The CPI – which measures a bevy of goods ranging from gasoline and health care to groceries and rents jumped 0.5% in the one-month period from November.
Economists expected the index to show that prices surged 7% in December from the year-ago period and 0.4% from the previous month.
So-called ‘core prices,’ which exclude more volatile measurements of food and energy, soared 5.5% in December from the previous year – a sharp increase from November, when it rose 4.9%. It was the steepest 12-month increase since 1991.
The latest inflation data caps a year of eye-popping price hikes. For example, in December, gasoline prices surged throughout 2021, jumping by nearly 50%. The overall consumer price index increase follows a 6.8% year-over-year jump in November.
Some of the items that are more expensive because of inflation are:
- Meats, poultry, fish, and eggs: 12.5% increase
- Fruits and vegetables 5% increase
- Electricity: 6.3% increase
- Furniture and bedding: 13.8% increase
- Women’s dresses: 8% increase
- Jewelry and watches: 7.2% increase
- Rent of primary residences: 3.3% increase
Gasoline and airfare have also seen a massive price increase over the last year, with used cars and trucks seeing a 37.3% price increase.
It’s important to mention that these price increases are before the Build Back Better Agenda that Biden. Biden would only significantly increase the inflation rate. Some experts warn it could take years for the worldwide supply chain crisis to resolve finally.
On Tuesday, Chair Jerome Powell told Congress that the Federal Reserve is prepared to accelerate the interest rate hikes it plans to begin this year if it deems necessary to curb high inflation. Fed officials have estimated to raise their short-term benchmark rate three times this year, now pegged near zero. Many economists environ as many as four Fed rate hikes in 2022.
The rate increases would likely increase borrowing costs for home and auto purchases and business loans, potentially slowing the economy. The rate hikes also mark a sharp reversal in policy by Fed policymakers, who as recently as September had been split over whether to raise rates even once this year.
The Fed intends to lower longer-term interest rates to encourage borrowing and spending. While the Fed quickly plans to pivot to help the economy, economists and some senators are concerned if this pivot is too late in the face of accelerating inflation and will put the economy at more of a risk as a result.
Polls show that inflation is finally becoming a bigger concern to Americans than the pandemic. When it will start to subside is still unknown. Hopefully, we will see a much-needed change during the midterm elections.
Chairman Jerome Powell has already signaled the U.S. central bank plans to speed up its withdrawal of support for the U.S. economy over the year. Powell told the Senate Banking Committee during his confirmation hearing on Tuesday. “At some point, perhaps later this year, we will start to allow the balance sheet to run off, and that’s just the road to normalizing policy.”