US Inflation Reached Its Highest Level Since 1982

The Bureau of Labor Statistics reports the consumer price index (CPI) rose by 6.8% year-on-year, the highest rate since June 1982. As expected, the figure was up from 6.2% in October.

The survey claimed costs rose across the board, with petrol, shelter, food, and vehicles contributing the most. Costs for eating out rose by 5.8%, the most significant pace since January 1982.

Meanwhile, the prices for meals eaten at home rose the most since December 2008. Fuel prices rose by 58.1% year-on-year, the highest yearly rate since April 1980.

The Federal Reserve’s Stance

Inflation has been driven by the economy’s recovery from the disease outbreak. Though at slightly lower rates, a trend reflected in Europe and the UK, where price growth is expected to top 5% by spring conveniently.

It pushed the Federal Reserve to find a faster method to wind down multi-billion-dollar stimulus packages and ultra-low bank rate policies. Such policies helped the US economy weather the epidemic.

Joe Biden has dwindled in public popularity, due to high inflation. Global supply chain constraints are pushing up costs, as manufacturers struggle to fulfill rising demand while ports remain clogged.

Employers facing labor shortages have increased salaries. The Fed’s chairman, Jerome Powell, recently abandoned his position that inflation was a “transitory” outcome of supply constraints.

He has since indicated the Federal Reserve, which meets next week to make its latest policy decision, will likely reduce stimulus more quickly. However, falling oil and gas costs may be relieving strains, say analysts.

The advent of omicron may further depress demand for shopping, vacations, and dining out. Yet, for analysts and market participants, the word of 2021 is “transitory.”

According to central bankers worldwide, this year’s surge in inflation is only a regular rise reflecting supply chain constraints built up during the epidemic.

World’s Most Influential Central Banker Supports Rate Hikes

The US Federal Reserve, Bank of England, and European Central Bank used rate hikes to justify not tightening monetary policy or removing emergency stimulus measures. They were implemented in 2020, even though inflation was running pretty strong in each locale.

The Fed’s assurance rattled investors that the inflation increase is just transitory. “It’s probably time to retire that word,” said Fed Chairman Jay Powell to Congress.

As a result of the epidemic and its aftermath, supply and demand mismatches continue to unravel, according to the world’s most powerful central banker. However, he noted rising energy costs, salaries, and rents might keep inflation higher than predicted in early 2022.

He remarked the forces pushing inflation up next year look to be lingering. His remarks imply the Fed may begin unwinding its asset purchases—quantitative easing—earlier than initially expected.

Last month, the Fed said it would lower its monthly asset purchases by $15 billion in November and December. That would mean QE would finish in June of next year, with the Fed then able to start raising US interest rates from their present near-zero level.