U.S. consumer prices increase strongly in December -Breaking
© Reuters. FILE PHOTO – Shoppers look around at Home Depot while they wear masks in an effort to slow down the spread of Coronavirus Disease (COVID-19), in North St. Louis, Missouri. This was April 4, 2020. Picture taken April 4, 2020. REUTERS/Lawrence Bryant/File
WASHINGTON (Reuters] – U.S. consumer inflation rose strongly in December. It was nearly 40 years since the last time it occurred. These figures could increase expectations that Federal Reserve may raise interest rates by March.
Labor Department reported Wednesday that the consumer price index climbed 0.5% in December, after rising 0.8% by November. The CPI climbed 7.0% in the twelve months to December. The increase was 7.0%, the highest year-over-year growth since June 1982. This follows a November 6.8% gain.
Reuters polled economists and predicted that the CPI would rise 0.4% year-over-year, while rising 7.0%.
High inflation is a result of the COVID-19 pandemic that snarls supply lines. This is impacting President Joe Biden’s approval ratings.
Budding wage pressures are helping to lift inflation, which is already well beyond the Fed’s target of 2%. According to the government, unemployment fell 22 months ago to 3.9% in December. This indicates that the labor force is near its maximum capacity.
Jerome Powell (Fed Chair) stated Tuesday that the U.S. central banking was prepared to make all necessary efforts to stop high inflation “entrenched” during testimony at his Senate Banking Committee nomination hearing. This is in addition to the four-year tenure as Fed Chairman.
Ryan Sweet, a Senior Economist at Moody’s Analytics (NYSE:) in West Chester, Pennsylvania, stated that “the laundry list of reasons the Fed should begin removing monetary policies accommodation is growing.” “Inflation must slow rapidly in order to relieve some of the Fed’s pressure, and it is highly unlikely that this will happen.”
The odds of an interest-rate hike in March are about 85%, with a minimum of three quarter-point increases by year’s end. [FEDWATCH]
According to economists, the annual CPI rate will probably peak in March or December. An Institute for Supply Management survey released last week showed that manufacturers reported improved supplier deliveries in December, which is a sign of supply shortages starting to recede.
The Omicron variant of COVID-19 could lead to a rise in cases and slow the progress towards normalization.
After rising 0.5% in November, the CPI increased 0.6% without taking out volatile food and energy. The
Through December 12, the core CPI rose 5.5%. The increase was 5.5%, the highest year-over-year growth since February 1991. This followed a November 4.9% gain.
The rising costs of rental services, and the scarcity of goods like cars are driving inflation. Core CPI rates are expected to peak in February, year-on-year.
According to David Kelly (NYSE:) Funds chief global strategist, JPMorgan, “The first quarter should see inflation peaking with lower energy prices, a decrease in food and automobile inflation allowing for a slower rise in prices for rest of the year,” he said.
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