rose US consumer prices Strongly in December and the annual increase in inflation was the largest in about four years, which may strengthen expectations that the Federal Reserve will start raising interest rates as early as perhaps in March.
The US Labor Department said on Wednesday that the consumer price index rose 0.5%, last month, after rising 0.8%, in November.
In the 12 months to the end of December, the CPI jumped 7.0%. This is the largest year-on-year increase since June 1982 and follows a 6.8% increase in November.
Analysts polled by Archyde.com had expected the consumer price index to rise 0.4%, in December, and to jump 7.0%, on an annual basis.
Inflation rates are the fastest in the United States in 4 decades.
This rise explains the rapid shift in the Federal Reserve’s approach to raising rates faster than expected.
Commodity prices in America rose in November by 6.8% from a year ago, the highest since 1982, and prices for fuel, housing, food and used cars were among the highest increases this month.
Record job gains in 2021 help offset losses in 2020.
Rising inflation underscores why US officials are prepared for faster monetary policy normalization than previously expected. Adding to the issue is evidence of a tight labor market, including a jump in wages and a decline in unemployment in data released on Friday.
Fed watchers may get more clarity next week about whether a rate hike may come as soon as March, and when the central bank will start shrinking its $8.8 trillion balance sheet.
US President Joe Biden said there were signs of an “improvement” in inflation figures released Wednesday, with price increases slowing in some key sectors, even if the overall rise was the highest in four decades.
“Today’s report, which shows a significant decrease in inflation last month, with the decline in gas and food prices, shows that we are making progress,” the US president said in a statement.
“At the same time, this report confirms that we still have more work to do, with continued price hikes that put pressure on household budgets,” he added.
Mohannad Al-Amy, managing director of BIM Capital, said that the inflation data indicates that the pace is increasing towards fiscal tightening to curb inflation.
In his interview with Al-Arabiya, he explained that the anti-inflation measures will take several months, and will stop when there are data indicating a decline in inflation to acceptable levels, which are much lower than the current levels.
He explained that the year 2022 will represent a return to the normal conditions of interest levels, especially in the major industrialized countries.
He stated that with the rise in interests, there will be a challenge in stock prices, especially technology shares, which will witness a decline this year.
He believes that the current inflation in America is at the highest level, and is caused by the repercussions of supply chain problems, the rise in available income as a result of working from home, government financial support, high oil prices and quantitative easing, stressing at the same time that oil prices in total inflation represent a small part.