On Wednesday, the Labor Department revealed data showing that in December, consumer prices rose by 7% over the previous year, the fastest increase in roughly 40 years. The Labor Department’s Bureau of Labor Statistics showed the consumer price index increased 7%, the fastest increase since 1982.
“The latest Consumer Price Index data, released Wednesday by the Bureau of Labor Statistics, marks the third consecutive month in which the index, a measure of what consumers pay for goods and services, rose by more than 6 percent,” NBC News reported.
“The number of price categories experiencing inflation of 3% or more in the past year has nearly doubled since December 2020. That share is the highest it has been since 1991,” The Wall Street Journal pointed out.
Speaking before the Senate Banking Committee on Tuesday, Federal Reserve Chairman Jerome Powell admitted, “We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing and transportation,” Powell said.
Moody’s Investor Services stated that supply chain issues have contributed to the problem, explaining, “Supply has not kept up with this rise in demand, and prices of goods have surged….Supply disruptions, especially for semiconductors, have also contributed to shortages of high-ticket items such as new and used cars, and pushed up prices.”
Inflation is also fueled by consumers deciding to buy products now before their prices rise, driving up demand further. “Federal Reserve officials are watching the inflation data closely and are widely expected to raise interest rates this year in an effort combat rising prices and as the jobs picture approaches full employment,” CNBC noted.
Seema Shah, chief strategist at Principal Global Investors, told Fox Business, “Inflation at 7% is no joke.”
Greg McBride, chief financial analyst at Bankrate, asserted:
In the past six months, we’ve heard a chorus of CEOs on quarterly company earnings conference calls talk about their ability to raise prices with very little pushback from consumers. … The risk going forward is the dreaded wage-price spiral where, because of rising prices, workers demand higher wages, which then lead to higher prices and further demands for higher wages….Not only do prices continue to rise but wages never really keep pace, further squeezing household buying power.
Mike Loewengart, managing director for investment strategy at E-Trade, added:
This morning’s CPI read really only solidifies what we already know: Consumer wallets are feeling pricing pressures and in turn the Fed has signaled a more hawkish approach. But the question remains if the Fed will pick up the pace given inflation is seemingly here to stay, at least in the medium-term….With Covid cases continuing to rise, the impact on the supply chain and labor shortages could persist, which only fuels higher prices.