The Bureau of Labor Statistics reported on Thursday that U.S. inflation jumped to a 40-year high, since 1982 , with prices up 7.5% in January, year-on-year.
The rise in the Consumer Price Index (CPI), which measures the costs of a wide range of goods, was the largest since February 1982; rising 0.6% compared to December, yet, lower than last October when Inflation rose 0.9%, month over month.
The U.S. Inflation is rising due to rising demand and lack of supply due to the pandemic's impact on gloabl trade.
The rise in food, electricity and rent prices was the biggest contributor to this increase; the food price index rose 0.9% in January after a 0.5% increase in December, while the Energy Index also rose 0.9% during the month.
Even after removing the fluctuating food and energy prices from the list, inflation is still rising 6% year-on-year. Also, the shortage of used cars also continued to drive the rally of car prices, which increased 40.5% in January (YoY). Housing costs are also up 4.4% from a year earlier.
The Federal Reserve indicated that it intends to raise interest rates at its March meeting in an effort to discourage spending and lower rates. On a note to investors, Oxford Economics argues that the latest CPI news is likely to mean higher interest rates in the coming months.
On Wednesday, the White House warned that the latest consumer price rate could be elevated. "We expect an uptick in the annual inflation reading in tomorrow's data," said Jen Psaki, the White House press secretary, adding that "More than 7%, some predict, wouldn't be a surprise."
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