New Delhi: Consumer prices in the US saw a solid increase in December as inflation rose at the fastest pace in nearly 40 years, from mounting pressure a year ago on President Joe Biden and the Federal Reserve to address one of the biggest economic challenges. percentage increased. ,
Consumers saw a sharp rise in the prices of cars, gas, food and furniture in 2021 amid an economic recovery from the pandemic slowdown, according to an AP report.
The government pumped in money apart from keeping interest ultra-low to drive demand for the goods, while vaccinations gave people the confidence to eat out and travel.
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What causes inflationary pressure?
Along with the increase in spending, the supply chain remained under pressure due to shortage of labor and raw materials which put pressure on prices. On Wednesday, the Labor Department reported that a measure of inflation excluding volatile food and gas prices jumped 5.5 percent in December, the highest in decades. Overall inflation rose 0.5 per cent since November, from 0.8 per cent in the previous month.
Resolving bottlenecks in supply chains could ease the pressure, but most economists say inflation will not return to pre-pandemic levels anytime soon.
“US inflationary pressures show no sign of easing,” said James Knightley, chief international economist at financial services company ING. “It hasn’t been that high since the days of Thatcher and Reagan. We may be closer to the peak, but the risk is that inflation will last longer.”
Is inflation only America’s problem?
Not only is the US facing the problem of inflation, but among the 19 European countries that use the euro currency, inflation rose 5 percent in December compared to a year ago, the biggest increase on record.
However, the United States has not seen anything of the sort since the early 1980s. At the time, Fed Chairman Paul Volcker took measures to push interest rates to extremely low levels, the prime rate for banks’ best customers reaching 20 percent in 1980, plunging the economy into a deep recession.
But Volcker managed to rein in inflation, which had been running at double-digit year-on-year levels for most of 1979–1981.
Inflation may subside as the omicron begins to decline and Americans shift more of their spending to services such as travel, eating out and watching movies. This will reduce the demand for goods and help in clarifying the supply chain.
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