WASHINGTON, (Reuters) – U.S. consumer price surges in February culminating in the biggest annual rise in over 40 years. Inflation is expected to continue rising as Russia’s war on Ukraine increases the prices of other commodities.

Labor Department reported that the consumer price index grew 0.8% in February, after rising 0.6% in January.

CPI rose 7.9% over the 12-month period ending February. It was the highest year-on–year jump since January 1982. This was following a jump of 7.5% in January, and it marked the fifth consecutive month with CPI readings above 6%.

Reuters polled economists and they predicted that the CPI would increase 0.8% and rise to 7.9% year-on.

Inflation is way above the Federal Reserve’s 2.2% target. According to economists, seven additional rate hikes are possible this year by the U.S. Central Bank.

CPI data from last month does not capture the dramatic rise in oil prices since Russia invaded Ukraine, Feb. 24, 2008. After a global benchmark of $139 a barrel hit in 2008, prices rose by more than 30%. However, they retreated Wednesday on reports that the United Arab Emirates was calling on other OPEC member countries to increase production.

Moscow has been subject to harsh sanctions by the United States and allies. President Joe Biden banned imports from Russia on Tuesday. Russia is second in crude oil exports.

AAA data revealed that average gasoline prices in America are $4.318/gallon, compared to $3.469 per month.

David Kelly (NYSE:) Funds, New York’s chief global strategist, said that if the annual average gasoline price was $4.20, it would cost over $1,000 more to cover the household expenses. Inflation is expected to remain high in the second quarter due to Russia-Ukraine’s war. This has also caused a rise in prices for wheat and other commodities.

According to Kevin Cummins, chief U.S. economist for NatWest Markets Stamford (NYSE:), “Our estimates indicate that gasoline and prices will add more than 1 full percentage point to the overall year-on–year prints in each of the next ten month,” he said.

High inflation is more severe for households with lower incomes, as they tend to spend less on fuel and food.

Tight Labor Market

Because of a switch in expenditure to goods and services after the COVID-19 outbreak, inflation had been a problem long before Russia-Ukraine. The pandemic relief funds of trillions of dollars arouse spending which runs counter to capacity limitations as the coronavirus disrupts the labor market dynamics.

The CPI increased 0.5% in February, after rising 0.6% in January.

The core CPI soared 6.4% in the twelve months to February. This was the biggest year-on-year increase since August 1982, and it followed an 8.0% increase in January.

The core CPI has been fuelled by increasing rentals and the shortage of goods such as motor vehicles. The core CPI is also seeing a sharp decline in coronavirus-related infections. This has boosted demand for services such as air travel and accommodation.

Many economists predicted that the annual core CPI rate would reach 6.5% by March. However, it began to fall in April after large increases in the spring.

Lou Crandall (LON) chief economist, Wrightson ICAP in Jersey City, stated that while we still believe that this outcome is most likely, there’s a chance that energy transfer effects caused by the recent spike in oil prices could slow down that process.

The Fed is still unsure how it will reconcile the effects of higher oil prices and inflation data with the ‘energy taxes’ impact on incomes.

Even though wage growth was slowing, tightening labor markets will lead to higher inflation. Nearly 11.3million job opportunities were available at the end February. There was 2.9% unemployment in the jobs-workers gap, or 4.8 million.

On Thursday, a separate Labor Department report showed that initial claims for state unemployment benefits rose 11,000 to 227,000 in a seasonally adjusted week ending March 5. These levels are consistent with tight labor markets.

Economists predicted 217,000 new applications in the last week. The number of claims has fallen from 6.149million in April 2020, a record.