Latest Inflation Report Holds No Good News

US inflation soared 7.9% in past year, a new 40-year high
By Newser Editors and Wire Services
Posted Mar 10, 2022 8:01 AM CST
Another Month, Another Fresh Inflation High
Price for a gallon of regular-grade gasoline is shown on a digital sign at a service station Wednesday, March 9, 2022, in Denver.   (AP Photo/David Zalubowski)

(Newser) – Propelled by surging costs for gas, food, and housing, consumer inflation jumped 7.9% over the past year, the sharpest spike since 1982 and likely only a harbinger of even higher prices to come, reports the AP. The increase reported Thursday by the Labor Department reflected the 12 months ending in February and didn’t include most of the oil and gas price increases that followed Russia’s invasion of Ukraine on Feb. 24. Since then, average gas prices nationally have jumped about 62 cents a gallon to $4.32, according to AAA. The cost of wheat, corn, cooking oils, and such metals as aluminum and nickel have also soared since the invasion. Ukraine and Russia are leading exporters of those commodities.

The government’s report Thursday also showed that inflation rose 0.8% from January to February, up from the 0.6% increase from December to January. And the economic consequences of Russia’s war against Ukraine have upended a broad assumption among many economists and at the Fed: That inflation would begin to ease this spring because prices rose so much in March and April of 2021 that comparisons to a year ago would show declines. Should gas prices remain near their current levels, Eric Winograd, senior economist at asset manager AllianceBernstein, estimates that inflation could reach as high as 9% in March or April.

Seeking to stem the inflation surge, the Federal Reserve is set to raise interest rates several times this year beginning with a modest hike next week. But soaring energy costs pose a particularly difficult challenge for the Fed. Higher gas prices tend to both accelerate inflation and weaken economic growth. That's because as their paychecks are eroded at the gas pump, consumers typically spend less in other ways. That pattern is akin to the "stagflation" dynamic that made the economy of the 1970s miserable for many Americans. Most economists, though, say they think the US economy is growing strongly enough that another recession is unlikely, even with higher inflation.

(Read more inflation stories.)

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