Consumer prices in the United States rose last month at the fastest annual rate in nearly 40 years, amplifying how rapid and persistent inflation is eroding paychecks and increasing pressure on the Federal Reserve to tighten its monetary policy.
The consumer price index climbed 6.8% from November 2020, according to Labor Department data released on Friday. The widely watched inflation indicator rose 0.8% from October, beating expectations and continuing a trend of large increases that started earlier this year.
The median forecast from a Bloomberg survey of economists predicted an annual gain of 6.8% and a 0.7% lead from the monthly measure. The yield on 10-year Treasuries slipped as S&P 500 index futures gained and the dollar was little changed as numbers were generally not worse than expected.
The increase in the CPI reflected broad progress in most categories, similar to last month’s report. Gasoline, shelter, food and vehicles were among the major contributors to the month-over-month increase.
The data reinforces expectations that the Fed will speed up the end of its bond buying program at the last central bank meeting of the year next week. Central banks – and politicians – around the world are under increasing pressure to deal with rising inflation as workers spend more at groceries and at the gas station.
The figure “just keeps the pressure on the Federal Reserve,” Kathy Bostjancic, chief US financial economist at Oxford Economics, told Bloomberg Television. “It is a very difficult place for them.”
Inflation “is going to stay hot and sticky throughout the first quarter,” she said.
A faster cut would open the door for the Fed to start raising interest rates. At the same time, investors reduced bets on the stiffness of the Fed’s hikes in 2022, indicating that Friday’s data showed a higher chance that inflation would slow as the monthly change was smaller than it was. October.
Annual CPI increases are expected to hover around 7% through 2022.
Excluding the volatile components of food and energy, so-called base prices rose 0.5% from the previous month. The core CPI was up 4.9% from a year earlier, a new high in 30 years.
Shelter costs – which are seen as a more structural component of the CPI and represent about a third of the overall index – rose 0.5% in November from the previous month.
Compared with the same month last year, the 3.8% gain was the largest since 2007. Housing costs are expected to rise next year as surging rents and house prices fuel the measure.
Furniture, clothing and airline tickets also contributed to the increase in inflation.
Rising prices for basic necessities add up for Americans:
â¢ Food in the home is up 6.4 percent from a year ago, the highest number since December 2008.
â¢ Gasoline rose 6.1 percent from the previous month, matching the increase in October.
â¢ Principal residence rent and owners’ equivalent rent were both up 0.4% from October.
As a result, President Joe Biden’s approval ratings sagged, increasing political pressure on the administration to act. While the White House has taken some action – such as creating a supply chain task force – inflationary pressures continue to mount. Rapid inflation will also likely impact the ultimate size and fate of Biden’s Build Back Better bill.
Looking ahead to next year, supply chain challenges will continue to push prices up in the near term, but are expected to subside as Americans shift to more normal consumption patterns.
Yet other factors, such as labor constraints and housing costs, can keep inflation high.
Food prices will likely also remain high next year, according to David MacLennan, CEO of Cargill Inc. The CPI report showed that overall food costs, including outside the home, have increased by 6 , 1% on the previous year – the highest since 2008.
âI thought the inflation of ags and food was transitory. I feel less now because of the persistent shortages in the labor markets, âMacLennan said last month in an interview with the Bloomberg New Economy Forum in Singapore. âThis is one of the parts of the supply chain that we monitor the most closely. “
Wages have risen considerably in recent months, but not as fast as consumer prices. Inflation-adjusted average hourly earnings fell 1.9% in November from a year earlier, the largest drop in six months, according to separate data released on Friday.
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