WASHINGTON: US consumer prices rose solidly in December as rental housing and used cars maintained their strong gains, the biggest annual increase in inflation in nearly four decades, buoying expectations that the Federal Reserve will hold back in early March. Will start raising interest rates.
The Labor Department’s report on Wednesday showed the labor market was at or near maximum employment, based on data from the previous week.
Fed Chairman Jerome Powell said on Tuesday that the US central bank is ready to do what was needed to prevent high inflation from becoming “intrusive”, before the Senate Banking Committee ahead of a nomination hearing for a second four-year term. During testimony. Bank.
“The Fed is going to be forced to raise rates in March and depending on political pressure on them – from both sides of the aisle – they will have to raise rates four or more times this year and potentially more next year,” The Independent. Chris Zacarelli, Chief Investment Officer of Advisory Alliance, said.
The Consumer Price Index rose 0.5% last month after rising 0.8% in November. In addition to higher rents, consumers paid more for food, although the 0.5% increase in food prices was less than in recent months. Gasoline prices fell 0.5% after rising 6.1% in both November and October.
In the 12 months to December, the CPI rose 7.0%. This was the biggest year-on-year increase since June 1982 and followed a 6.8% increase in November.
Economists polled by Reuters had forecast the CPI to rise 0.4% and shoot up 7.0% on a year-on-year basis.
The economy is experiencing high inflation as the COVID-19 pandemic impacts supply chains. The high cost of living is weighing on President Joe Biden’s approval rating.
US stocks opened higher last month amid relief from a rise in prices in line with expectations. The dollar fell against a basket of currencies. US Treasury prices rose.
inflation above target
Inflation is well above the Fed’s 2% target and is also being fueled by budding wage pressures. The government reported last Friday that the unemployment rate fell to a 22-month low of 3.9% in December.
The money market is currently priced at around 85% odds of an interest rate hike by March and at least three quarter-point increases in total by the end of the year.
Economists believe that the year-on-year CPI rate probably peaked in December or is likely to do so by March.
There are signs that supply bottlenecks are beginning to ease, with last week’s Institute for Supply Management survey with manufacturers reporting better supplier deliveries in December.
But the rise in COVID-19 cases, driven by the Omicron variant, could be slow progress towards normalization of supply chains.
Excluding volatile food and energy components, the CPI rose 0.6% last month after rising 0.5% in November.
The so-called core CPI was increased by rent, with rents equal to the owners’ primary residence, that a landlord would receive from renting a home, rising a solid 0.4% for the third straight month.
The prices of used cars and trucks increased by 3.5% after a 2.5% increase in each of the last two months. The increase likely reflects Hurricane Ida, which destroyed thousands of motor vehicles, among other property.
New motor vehicle prices rose 1.0%, marking the ninth consecutive month of profit. A global semiconductor shortage has curtailed automotive production.
Prices for home furnishings and operations rose 1.1%, while the apparel index rose 1.7%, the biggest increase since January 2021. Healthcare costs increased by 0.3%.
In the 12 months to December, the so-called core CPI gained 5.5%. This was the biggest year-on-year gain since February 1991 and followed a 4.9% gain in November. The year-on-year core CPI rate has been seen to peak in February.
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