Prices paid by US consumers jumped 7% in December from a year earlier, the highest inflation rate since 1982 and the latest evidence that rising costs for food, gas, rent, and other necessities are heightening the financial pressures on America's households, reports the AP. The Wall Street Journal reports this is the third consecutive month where inflation has topped 6%. What's known as the core price index, which doesn't take into account food and energy, was up 5.5% in December over the prior year. That tops November's 4.9% and marks the highest rate since 1991.
- Polls are shifting: Rising prices have wiped out the healthy pay increases that many Americans have been receiving, making it harder for households, especially lower-income families, to afford basic expenses. Poll show that inflation has started displacing even the coronavirus as a public concern, making clear the political threat it poses to President Biden and congressional Democrats.
- Fed to act: On Tuesday, Chair Jerome Powell told Congress that the Federal Reserve was prepared to accelerate the interest rate hikes it plans to begin this year if it deems it necessary to curb high inflation. Fed officials have estimated that they will raise their benchmark short-term rate, now pegged near zero, three times this year. Many economists envision as many as four Fed rate hikes in 2022. Those rate increases would likely increase borrowing costs for home and auto purchases as well as for business loans, potentially slowing the economy.
- One particularly jarring stat: CNBC reports used vehicle prices were up another 3.5% in December, "bringing the increase from a year ago to 37.3%."
- A real-world example: Gene Lee, CEO of Darden Restaurants, which owns Olive Garden and other brands, told investors recently that this is “the toughest inflationary environment we’ve seen in years.” The company said its food and beverage costs jumped 9% during the quarter, and its hourly wage costs rose nearly 9% as it raised pay to attract workers. Darden said it raised its prices, in turn, by 2% during the quarter and expects to raise them by 4% over the next two quarters to help compensate. Rick Cardenas, the company’s president and chief operating officer, said those higher prices have yet to reduce consumer demand.
(Read more inflation