Monday, January 30, 2023

US inflation rose 7% last year, the most since 1982.

Consumer Prices 80977

WASHINGTON. Inflation jumped at its fastest pace in nearly 40 years last month, rising 7 percent from a year ago, pushing household spending, eating up wage gains, and putting pressure on President Joe Biden and the Federal Reserve to tackle the growing threat. into the US economy.

Prices for cars, gasoline, food and furniture rose sharply during the rapid recovery from the pandemic recession. Americans have increased spending amid a shortage of workers and raw materials, which has led to shrinking supply chains.

The Labor Department said Wednesday that excluding volatile food and gas prices, so-called benchmark prices rose 0.6% from November to December. On an annualized basis, staple food prices jumped 5.5% in December, the fastest rise since 1991.

Rising prices have offset the healthy wage increases that many Americans have received, making it harder for households, especially low-income families, to afford basic expenses. Polls show that inflation has begun to crowd out even the coronavirus as a public issue, clearly showing the political threat it poses to President Biden and Democrats in Congress.

Much of the inflation continues to be driven by the supply-demand mismatch caused by the pandemic. Used car prices have risen more than 37% in the past year as new car production is constrained by a shortage of semiconductors.

Shortages and higher prices in U.S. grocery stores have also surged in recent weeks as new challenges such as the omicron option and harsh weather have exacerbated supply chain problems.

Many restaurants pass the higher labor and food costs onto their customers. Darden Restaurants, the company that owns Olive Garden, LongHorn Steakhouse and other chains, said it raised prices by 2 percent late last year and expects to raise prices by another 4 percent over the next six months.

Darden CEO Jin Lee recently told investors that this is “the toughest inflationary environment we’ve seen in years.”

Chairman Jerome Powell told Congress on Tuesday that if the need arises for a more aggressive fight against high inflation, the Federal Reserve is ready to accelerate the interest rate hike it plans to begin this year. Fed officials have calculated that they will raise the base short-term rate three times this year, which is currently pegged to zero. Many economists are forecasting as many as four Fed rate hikes in 2022.

This rate hike is likely to increase the cost of borrowing for home and car purchases, as well as for business loans, which could slow the economy. The rate hike also marks a dramatic change in policy from Fed policymakers, who were divided back in September over whether to raise rates at least once this year. The Fed is also rapidly discontinuing monthly bond purchases that were intended to lower long-term interest rates to stimulate borrowing and spending.

However, the Fed’s swift turnaround did not clear up questions from many former Fed officials, economists and some senators about whether the Fed was too slow to act to end its ultra-low interest rate policy in the face of accelerating inflation – and stymie the economy. risk as a result.

In his speech to Congress on Tuesday, Powell said the Fed mistakenly believed supply chain bottlenecks that helped drive commodity prices up would not last as long as they were. Once the supply chains are unraveled, he said, prices will fall again.

However, for now, supply problems persist, and while there are signs that they are waning in some industries, Powell admitted that progress has been limited. He noted that many cargo ships remain docked off the ports of Los Angeles and Long Beach, the largest in the country, pending unloading.

As the Biden administration faced public dissatisfaction with rising inflation, the president said his administration’s investments in ports, roads, bridges and other infrastructure would help loosen tangled supply chains.

Nation World News Desk
Nation World News Desk
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