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US inflation climbed 7% last year, the most since 1982

Inflation surged in December at its fastest year-over-year rate in nearly four decades, rising 7% and pushing up costs to consumers, offsetting recent wage gains and increasing pressure on the economy. President Joe Biden and the Federal Reserve to tackle what is increasingly America’s core economy. worry.

Prices have skyrocketed during the recovery from the pandemic recession as Americans increased spending on goods such as cars, furniture and appliances.

These increased purchases have clogged ports and warehouses and exacerbated supply shortages of semiconductors and other parts. Gas prices, while declining a bit from November to December, have risen over the past year, in part because Americans have driven more in recent months after cutting back on travel and commuting earlier in the pandemic.

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The Labor Department reported on Wednesday that excluding volatile food and gas prices, so-called base prices jumped 0.6% from November to December, slightly more than the increase of 0. 5% from October to November. Measured year over year, basic prices jumped 5.5% in December, the fastest increase since 1991.

Rising prices have erased the healthy wage increases many Americans have received, making it harder for households, especially low-income families, to pay for basic expenses. Poll shows inflation has started to displace even the coronavirus as a public concern, clearly highlighting the political threat it poses to President Joe Biden and Democrats in Congress.

A significant portion of consumer inflation is still due to mismatches caused by a pandemic between supply and demand. Used car costs rose 3.5% from November to December and are up more than 37% from a year ago. With the production of new cars constrained by semiconductor shortages, consumers have taken over used cars, forcing their costs to rise.

Shortages in U.S. grocery stores have also worsened in recent weeks as new issues, like the omicron variant and inclement weather, have exacerbated the supply chain woes and labor shortages plaguing retailers. since the start of the coronavirus pandemic.

President Jerome Powell told Congress on Tuesday that the Federal Reserve was prepared to accelerate interest rate hikes it planned to begin this year if it deemed it necessary to curb high inflation. Fed officials have estimated they will raise their short-term benchmark rate, now close to zero, three times this year. Many economists envision up to four Fed rate hikes in 2022.

These rate hikes would likely increase borrowing costs for home and auto purchases as well as business loans, potentially slowing the economy. The rate hikes also mark a sharp turnaround in policy on the part of Fed policymakers, who, as recently as September, were divided over whether to raise rates even once that time. year. The Fed is also quickly ending its monthly bond purchases, which were aimed at lowering long-term interest rates to encourage borrowing and spending.

Yet the Fed’s swift pivot has not quelled questions from many former Fed officials, economists and some senators about whether the Fed has acted too slowly to end its rate policies. Ultra-low interest in the face of accelerating inflation – and putting the economy at risk as a result.

In his testimony to Congress on Tuesday, Powell said the Fed mistakenly believed the supply chain bottlenecks that helped drive up commodity prices would not last as long as they did. . Once supply chains were unlocked, he said, prices would come down again.

Yet for now, supply issues have persisted, and while there are signs they are easing in some industries, Powell acknowledged that progress has been limited. He noted that many cargo ships remain moored outside the Port of Los Angeles and Long Beach, the largest in the country, awaiting unloading.

With the Biden administration facing public discontent with rising inflation, President Joe Biden said his administration’s investments in ports, roads, bridges and other infrastructure would help mitigate the inflation by loosening some grumbling supply chains.

In the meantime, many restaurants have passed on some of their higher labor and food costs to their customers in the form of higher prices. So far, many consumers seem willing to pay more. Gene Lee, CEO of Darden Restaurants, owner of Olive Garden and other brands, recently told investors it was the toughest inflationary environment we’ve seen in years.

The company said its food and beverage costs jumped 9% in the quarter and hourly labor costs rose nearly 9% as it increased wages to attract workers. Darden said it increased its prices, in turn, by 2% in the quarter and expects to increase them by 4% in the next two quarters to help compensate. Rick Cardenas, the company’s president and chief operating officer, said those higher prices have yet to reduce consumer demand.

(Edited by : Jomy Jos Pullokaran)


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