American consumers got hit with the biggest price increases in nearly 40 years. The Labor Department reported Wednesday the consumer price index surged 7 per cent in the year through December.
That’s well above the Federal Reserve’s target, reports Reuters.
Supply chain snags caused by the health crisis and budding wage pressures are pushing up inflation. Driving the index higher: escalating rents and used car and truck prices.
The rapid rise of inflation is bolstering expectations that the Fed will begin raising interest rates as early as March. Fed Chair Jerome Powell told lawmakers on Tuesday that the economy no longer needs accommodative policies such as low interest rates.
“We are strongly committed to achieving our statutory goals of maximum employment and price stability. We will use our tools to support the economy and a strong labour market and to prevent higher inflation from becoming entrenched.”
The price index was in line with economists’ forecasts, so Wall Street took the data in stride, driving stocks higher in early trading Wednesday.
Economists believe the year-on-year consumer inflation rate probably peaked in December. But the health crisis could slow progress towards the normalization of supply chains ---- just as they started showing signs of easing.
