The Labor Department recently released a new set of troubling economic data regarding consumer prices across the United States, which is measured by the consumer price index (CPI). According to the department, the CPI continued to increase throughout December, alongside the largest increase in annual inflation that has occurred in nearly forty years.
Specifically, the CPI increased an additional 0.5 percent in December after already increasing by 0.8 percent in November, according to Labor Department data. Furthermore, in the 12-month period running through December, the CPI surged an additional 7.0 percent, which represents the largest year-over-year increase since June of 1982.
Reuters had previously polled various economists, who had predicted that the CPI would increase 0.4 percent and increase by 7.0 percent on a year-over-year basis.
In general, the American economy is suffering from tremendous inflation as the COVID pandemic snakes through the globe and snarls supply chains. Consequently, the resulting increases in the cost of living have resulted in President Joe Biden’s approval ratings dramatically plummeting.
The government also recently reported that unemployment has apparently dropped to 3.9 percent in December, marking a 22-month low, which also suggests that the labor market is approaching maximum employment.
Currently, inflation grossly exceeds the Federal Reserve’s preferred 2 percent target.
According to Fed Reserve Chairman Jerome Powell, the U.S. Central bank is prepared to take whatever actions necessary to prevent inflation from turning into an “entrenched” phenomenon. Powell made his remarks during an appearance before the Senate Banking Committee regarding a second term as the head of the nation’s bank.
In response to astronomical inflation, the Federal Reserve may start increasing interest rates as early as March.
According to Ryan Sweet, who serves as a senior economist at Moody’s Analytics, “the laundry list of reasons for the Fed to begin removing monetary policy accommodation is growing,” in reference to the quantitative easing that commenced on a grand scale following the 2007-2009 financial crisis.
“Inflation would need to decelerate rapidly to take some of the pressure off the Fed and this is unlikely to occur,” Sweet added.