US inflation leaps 5.8% in 2021, hits 40-year high
The US sees a surge in inflation at its fastest pace in nearly 40 years last month, a 7% spike from a year earlier that is increasing household expenses, eating into wage gains.
A key inflation measure closely watched by the US Federal Reserve rose at the fastest pace in nearly 40 years in December 2021, reaffirming market expectations that the central bank will begin raising interest rates in March to tame inflation.
The personal consumption expenditure (PCE) price index, the Fed’s preferred inflation measure, jumped 5.8 percent in December from a year ago, the fastest annual pace since mid-1982, the Commerce Department announced on Friday.
Prices rose sharply in 2021 for cars, gas, food, and furniture as part of a rapid recovery from the pandemic recession. Vast infusions of government aid and ultra-low interest rates helped spur demand for goods, while vaccinations gave people the confidence to dine out and travel.
The so-called core PCE price index that strips out volatile food and energy prices, rose 4.9 percent from a year ago, the fastest annual pace since September 1983, well above the Fed’s inflation target of 2 percent, Xinhua news agency quoted the Department as saying.
The latest inflation data came after the Fed on Wednesday signalled that the Central Bank is ready to raise interest rates as soon as March to combat surging inflation as it exits from the ultra-loose monetary policy enacted at the start of the COVID-19 pandemic.
The Central Bank has pledged to keep its federal funds rate unchanged at the record low level of near zero for roughly two years. But many Fed officials have expressed in recent weeks that they would be comfortable with a rate increase in March due to elevated inflation pressures.
The Labor Department reported that a measure of inflation that excludes volatile food and gas prices jumped 5.5% in December, also the highest in decades. Overall inflation rose 0.5% from November, down from 0.8% the previous month.
Price gains could slow further as snags in supply chains ease, but most economists say inflation won’t fall back to pre-pandemic levels anytime soon.
[With Inputs from IANS]
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