Jerome Powell on Tuesday said the Fed is ready to raise interest rates if needed.
The latest government data on inflation shows consumer prices are continuing to rise rapidly as pandemic-hit supply chains struggle to keep up with recovering consumer demand.
The Labor Department said the consumer price index – a measure of the price Americans pay for a daily basket of goods and services – has risen 7% over the past 12 months, the Labor Department said on Wednesday. This was the largest increase in a year since the period ending in June 1982, the DOL noted.
The index rose 0.5 percent in December, down slightly from 0.8 percent in November.
The new data comes as economists and policymakers decide how to respond to inflation as the data shows that it is not going away on its own in the way many initially claimed. Federal Reserve Chairman Jerome Powell said on Tuesday The Fed is poised to raise rates faster than originally planned in response to escalating prices.
Greg McBride, chief financial analyst at Bankrate, told ABC News via email Wednesday shortly after the report was released.
“Inflation rose rapidly year-over-year, hitting 7%, but decelerated monthly for the second month in a row, driven by falling energy and slower increases in food prices,” he added. “But core consumer prices are still rising at a phenomenal rate and show no signs of slowing down.”
As a result, McBride said rate hikes and cuts to pandemic bond-buying programs from the Fed “will likely begin as early as March.”
The so-called core index, or a measure for all commodities except the more volatile food and energy indexes, rose 5.5% year over year – the biggest change in 12 years. months since February 1991. The Core Index rose 0.6% in December, building on a 0.5% gain in November.
The energy index alone was up 29.3% year over year (due to a spike in the gas index) and the food index was up 6.3%.
Elevated housing prices, and used cars and trucks largely pushed the index higher in December, the DOL said, but indexes for home furniture, clothing, new vehicles and health care services also increased. The motor and leisure insurance indexes were among the few that fell last month.
Powell also said Tuesday in testimony before lawmakers that inflation is a threat to the labor market’s post-pandemic recovery, where Hiring has stalled in recent months and the unemployment rate is still rising compared with pre-pandemic levels.
However, the head of the Fed vowed to take action to prevent inflation from becoming “entrenched” in the economy.
“We know that high inflation is exactly a toll, especially for those who are less able to meet higher essential costs,” Powell told lawmakers on the Senate Banking Committee. such as food, housing and transportation. “We are strongly committed to achieving the statutory goals of maximum employment and price stability. We will use our tools to support a strong economy and labor market, and prevent higher inflation.”
https://abcnews.go.com/Business/consumer-prices-climb-past-year-highest-jump-1982/story?id=82195698 Consumer prices increased by 7% in the past year, the highest increase since 1982