More bad news for Joe Biden. Inflation has experienced its largest increase since June 1982. Indeed, consumer prices in the United States climbed 7% in 2021, while inflation is a major concern of President Joe Biden who is committed to fighting against the phenomenon.
Energy prices alone jumped 29.3%, and food prices 6.3%, according to the Consumer Price Index (CPI) released Wednesday by the Labor Department. Excluding the volatile energy and food sectors, so-called core inflation reached 5.5%, its highest rate since February 1991.
Rising prices, public enemy number 1
Inflation, which many economists, including those in the White House and the US Central Bank (Fed) believed to be transient, has now become public enemy number one. President Biden has promised to stop this spiral. The Fed targets annual inflation of 2%.
In December alone, however, prices rose less quickly than in November, at 0.5% against 0.8%. But core inflation accelerated over one month, to 0.6% against 0.5% in November.
The index measuring energy prices “fell in December”, by 0.4%, “putting an end to a long series of increases”, notes the Department of Labor in its press release.
Rising prices for housing and used cars
In the last month of the year, house and used car prices rose the most. Those of food products have “also contributed (to the rise), although (they have) increased less than in recent months”, underlines the Department of Labor.
The Omicron variant could contribute to further increase prices, since the large number of contaminations forced employees to go into quarantine, de facto slowing down production and delivery, in particular.
Fed Chairman Jerome Powell, who was heard by senators on Tuesday, pledged to act “accordingly” if this record inflation persists in the second half of this year. In other words: the Fed is ready to raise rates more than expected.
He described an economy on the mend with a job market that “is recovering incredibly quickly” from the crisis into which the Covid-19 pandemic had plunged him in the spring of 2020.
Workers find jobs easily to the point that every month millions of people quit for a better job opportunity and better pay.
In December, unemployment fell to 3.9%, returning to close to its pre-pandemic level (3.5%). The wage increases offered by many employers to attract applicants and retain their employees are fueling inflation.