U.S. inflation rises to another 40-year high of 7%

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The US inflation rate is at its highest level in 40 years and shows no signs of slowing down, new data revealed on Wednesday.

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The consumer price index rose 0.5 percent in December alone, the US Bureau of Labor Statistics reported, enough to push the annual inflation rate to seven percent for the first time since 1982.

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The figure was in line with what economists had expected, but was up from a 40-year high of 6.8 percent in November.

Higher prices for shelter and used cars and trucks made the biggest contribution to the increase. The prices of used vehicles increased by more than 37 percent last year. Prices are rising mostly because a global shortage of semiconductor microchips has reduced the number of new cars that can be produced, leaving many buyers scrambling to find used cars.

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After being a major contributor to the uptrend for several months, energy prices fell 0.4 percent in the month as gasoline and natural gas prices moved from highs to lows. However, on an annual basis, energy prices have increased by about 29 percent, and gasoline in particular has increased by about 50 percent.

The high inflation rate presents a puzzle to policy-makers at the US Federal Reserve, who are intent on keeping interest rates low to help stimulate the economy in the face of the COVID-19 pandemic. But all that cheap lending is driving up the price of almost everything.

rates going up

Sal Guattieri, a senior economist and director of BMO Capital Markets, said Wednesday’s figures were a harsh reminder to the Fed and everyone else about the threat of inflation. “Yesterday, [Fed] Chair [Jerome] Powell warned that high inflation is a serious threat to recovery and that the Fed will need to take action to stop it.

Economists expect the US central bank to raise its benchmark interest rate by up to four times this year.

“They really didn’t need anyone to remind them that the economy no longer needs aggressive stimulus, and today’s report will only reinforce the view that the Fed has fallen well behind the curve and is in a hurry to catch up.” There may be a need,” Guatiri said. ,

Leslie Preston, senior economist and director at TD Bank, said that although the numbers are still high, consumers should brace themselves for even higher numbers in the coming months.

“Fuck you,” she said. “After reaching new highs, on a year-on-year basis, core inflation is likely to be even higher in Q1 2022 as price levels are compared to relative weakness in early 2021.”

Preston said that “we hope a rate hike is not far behind.”

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