Inflation hit a four-decade high in December, forcing Americans to pay steeper prices for everyday items such as groceries and gas, the feds said Wednesday.
The Consumer Price Index, a key inflation gauge that tracks the costs of goods and services including used car sales, groceries and rent, rose 0.5 percent in December and 7 percent year-over-year, according to data released by the Bureau of Labor Statistics on Wednesday.
“Increases in the indexes for shelter and for used cars and trucks were the largest contributors to the seasonally adjusted all items increase,” the BLS said in a release.
The latest surge marked the highest annual increase since June 1982. Inflation has exceeded 6 percent for three consecutive months.
Inflation has surged in recent months as the reopening US economy struggles to meet rising demand during the COVID-19 pandemic. Supply chain bottlenecks, shortages of key products and a tight labor market have contributed to higher costs for consumers.
The highly contagious Omicron variant is driving a record surge in COVID-19 infections, which could exacerbate economic gridlock in the weeks to come.
The increase in costs for goods and services has effectively erased wage gains despite favorable hiring conditions for American workers. Employers posted 10.6 million job openings in November and the unemployment rate is currently 3.9 percent, close to what the Federal Reserve considers full employment.
The latest data will put additional pressure on Fed officials and President Biden, who have faced criticism over their handling of inflation. The central bank is expected to raise interest rates at least three times this year.
Fed Chair Jerome Powell, who is seeking confirmation for another four-year term, told Senate lawmakers that inflation is a “severe threat” to the economy.
Powell noted that supply chain bottlenecks have cleared less quickly than the Fed anticipated when it initially referred to inflation as “transitory.” Aside from rate hikes, the Fed is eyeing a runoff of its bond holdings.
“If we see inflation persisting at high levels longer than expected, if we have to raise interest rates more over time, we will,” Powell added. “We will use our tools to get inflation back.”
Powell said he expects inflationary pressures to continue well into next year.
Meanwhile, Biden has called for increased major corporations in the meat and energy industries in recent months, arguing corporate greed has contributed to rising costs for Americans.
Biden pushed back on Republican criticism of his approach during a speech last week, calling the suggestion that he was not focused on inflation “malarkey.”
Concerns over inflation have imperiled Biden’s social spending bill, with Republicans — and some Democrats — warning more government spending will only hurt the economy further.
The latest Consumer Price Index data matched expectations. Economists expected inflation to rise 0.4 percent in December and 7 percent year-over-year, according to Dow Jones.
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