Tuesday, January 18, 2022

US consumer prices rise at fastest rate in nearly 40 years

Shoppers at Eastern Market, Washington DC, in Washington DC, USA, December 10, 2021. An inflation report released by the US Department of Labor on December 10 shows that inflation has risen at the highest rate in 40 years.

Prices in the US are rising at their fastest rate in nearly 40 years, with inflation rising 7% year-over-year in December.

Strong demand and scarce supplies for key goods like cars are driving growth, putting pressure on policymakers to act.

The US central bank is expected to raise interest rates this year.

The purpose of increasing the cost of borrowing is to reduce demand by making cars more expensive.

December’s growth marked the third month in a row that the US annual inflation rate has topped 6% — north of policymakers’ target of 2%. The last time the pace of inflation exceeded that level was in 1982.

Housing costs increased 4.1% year-over-year, compared to an annual average of 1.5% over the past 10 years, while the cost of groceries rose 6.5%.

Wednesday’s report from the Labor Department indicated that some of the pressure may be easing.

Energy costs fell 0.4% from November to December – the first drop since April. But the cost of energy has increased by about 30% in 12 months and has returned to its upward trend in recent times.

“Overall, it’s as bad as we expected,” said Paul Ashworth, chief economist at Capital Economics, of the December inflation report.

Price pressures in the US have been observed to varying degrees around the world.

The Organization for Economic Co-operation and Development, which represents more than 30 of the world’s largest economies, said this week that inflation among its members hit the highest rate in 25 years in November.

moves forward

In the UK, inflation hit a 10-year high in November, according to the World Bank, while globally, prices are rising at their fastest pace since 2008.

While many countries grapple with high food and energy costs, the US has seen an unusually large spike in inflation.

This is due to strong demand for homes whose spending was boosted by government coronavirus aid and a sudden shift from travel during the pandemic to things like furniture.

Economists in the US initially hoped that the pressure would ease as the pandemic faded. But the ongoing production snarls and the emergence of virus variants have led to a higher than expected price hike.

Jerome Powell

Federal Reserve Chairman Powell initially predicted that inflationary pressures would be momentary.

The head of the US central bank, Jerome Powell, told Congress on Tuesday, “It is proving more difficult than expected to end the pandemic.”

Wells Fargo economist Sarah House said it is now unlikely that inflation will naturally fade as the pandemic ends, pointing to labor shortages and wages, which are rising – though as prices rise. I’m not fast.

“While the extraordinary pace of goods inflation and the pace in shelter costs are still firmly rooted in the pandemic, an increasingly tight labor market and ensuing wage pressure will make it difficult for inflation to fall back on its own,” she said.

The issue has put pressure on the Biden administration, eroding consumer confidence despite other signs of a strong economy.

Mr. Powell has vowed to keep inflation under control by raising interest rates. But on Tuesday he warned that if supply chain issues persist, pointing to risks from new shutdowns in China, these steps will only go so far as to address the problem.

“Omicron, especially if China sticks to the no-Covid policy, could actually disrupt the supply chain again,” he said.

Official inflation data from China on Thursday showed prices rose less than expected in November, with producer prices up 10.3% and consumer prices up 1.5%.

But that easing is not necessarily an indicator of what will happen elsewhere, said Gian Maria Millesi-Ferretti, senior fellow at the Brookings Institution, a Washington think tank.

“Indicators of what’s happening [in China] For the labor market, some price increases due to wage demand and supply constraints are more important indicators,” he said.

Nation World News Deskhttps://nationworldnews.com
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