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Monday, January 24, 2022

US inflation rises to 7% for the first time since 1982

US consumer price growth rose in December at the fastest pace in nearly four decades, fueling the Federal Reserve’s threat of rising inflation and fears about the consequences of the economic recovery.

The consumer price index (CPI) rose 7 per cent year-on-year last month, a step up from the 6.8 per cent rate recorded in November and the biggest jump since June 1982.

Despite the faster annualized momentum, month-on-month price gains narrowed to 0.5 per cent between November and December, from 0.8 per cent in the previous period.

“Core” inflation, which removes volatile commodities such as food and energy, accelerated by an even greater magnitude than the previous reading.

It grew by 5.5 per cent, significantly higher than the earlier annual pace of 4.9 per cent. According to the Bureau of Labor Statistics, this translates to a monthly increase of 0.6 percent for the sixth time in the past nine months, with the figure exceeding 0.5 percent.

“There is nothing in the description of the data to suggest that inflation is fading in any meaningful way,” said Eric Vinograd, senior economist for fixed income at AllianceBernstein.

According to the BLS, increases in rent and other housing costs and the prices of used vehicles were the “biggest contributors” to December’s rise. Those expenses have increased by 4.1 percent since December 2020. The prices of used cars continued to rise steadily, rising by 3.5 per cent over the previous month and nearly 40 per cent from a year ago.

Energy prices fell 0.4 percent since November — the first drop in months — and gasoline prices fell as well.

Food prices also contributed once again to the historically high figures. The cost of food rose 0.6 percent from a month earlier, a 6 percent year-on-year increase and the biggest increase since January 1982.

The broader food index was up 0.5 per cent, a more modest pace over the previous period. The cost of apparel, household goods and medical care also rose.

The data, which was released by the BLS on Wednesday, showed US Federal Reserve Chairman Jay Powell warning that high inflation is a “serious threat” to labor market recovery and reaffirming the central bank’s intentions to sharply reduce does. Its monetary policy support.

“The Fed is now behind, so the urgency you hear in Powell’s voice on inflation is that he’s playing catch-up,” said Tom Porcelli, chief US economist at RBC Capital Markets. “The justification for the Fed to respond to inflation happened months ago.”

Porcelli expects the Fed to raise rates four times in 2022, starting in March, and four times in 2023.

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Once they reach their twin goals of maximum employment and inflation, which average 2 percent over time, senior executives begin to outline their plans to raise interest rates from their zero levels. Have given.

The December data further indicated that inflation was rising across a broader cross-section of the economy and was at greater risk of penetrability. It would put further pressure on the Biden administration on managing the economy in the 2022 midterm elections.

While the US president has presided over a booming economy that created more than 6 million jobs last year as the unemployment rate fell to 3.9 percent, a spike in prices and supply chain disruptions underpin sentiments of a strong recovery. has been estimated.

President Joe Biden said on Wednesday that while his administration was “making progress in slowing the rate of price increases”, the data underscored that “we have more work to do, price increases are still too high and families are going to be able to increase the prices.” Squeezing the budget”.

“This is clearly an area of ​​real challenge,” a senior White House official told the Financial Times ahead of the release. “While estimates expect moderation [of inflation] Throughout the year, the president and administration have been focused and trying to push this forward as much as possible.

The White House is trying to encourage more oil production globally by easing barriers at major ports, cracking down on anti-competitive behavior in some markets such as the meat industry, and lowering gasoline prices. However, it has refrained from adopting other inflation-fighting measures, such as the removal of duties on Chinese imports.

US inflation data prompted an abrupt pivot from the Fed late last year and battered global financial markets for months. But Wednesday’s reading, which was largely in line with economists’ forecasts, did not immediately hit the $22tn US Treasury market.

The yield on the benchmark 10-year Treasury fell 0.02 percentage points to 1.72 per cent after data in which modest selling pressure pushed the yield on the policy sensitive two-year note up 0.02 percentage points to 0.90 per cent.

US stock markets opened higher as investors digested data that appeared to keep the Fed on track for four quarter-point rate hikes this year.

“The Fed is facing both a labor market that is operating at near maximum employment and inflation,” said Tiffany Wilding, an economist at Pimco. “This suggests that their policy should be closer to neutral, as opposed to being exceptionally easy.”

“Their policy pivot is in line with that,” she said.

Additional reporting by Eric Platt and Kate Duguid in New York

World Nation News Deskhttps://www.worldnationnews.com
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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