Saturday, 22 January, 2022
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US consumer prices increase strongly in Dec

WASHINGTON: US consumer prices rose solidly in December, with the annual increase in inflation the largest in nearly 4 decades, which could bolster expectations that the Federal Reserve will start raising interest rates as early as March.

The consumer price index (CPI) increased 0.5 per cent last month after advancing 0.8 per cent in November, the Labor Department said on Wednesday. In the 12 months till December, the CPI surged 7.0 per cent. That was the biggest year-on-year increase since June 1982 and followed a 6.8 per cent rise in November, report agencies.

Economists polled by Reuters had forecast the CPI gaining 0.4 per cent and shooting up 7.0 per cent per cent on a year-on-year basis.

The economy is experiencing high inflation as the Covid-19 pandemic snarls supply chains. The high cost of living is weighing on President Joe Biden’s approval rating.

Inflation is well above the Fed’s 2 per cent target and is also being lifted by budding wage pressures. The government reported last Friday that the unemployment rate dropped to a 22-month low of 3.9 per cent in December, suggesting that the labour market is at or near maximum employment.

Fed chair Jerome Powell on Tuesday said the US central bank stood ready to do what was necessary to keep high inflation from becoming “entrenched,” in testimony during his nomination hearing before the Senate Banking Committee for a second 4-year term as head of the bank.

“The laundry list of reasons for the Fed to begin removing monetary policy accommodation is growing,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Inflation would need to decelerate rapidly to take some of the pressure off the Fed and this is unlikely to occur.”