US Price Rises Hit Highest Level in 40 Years

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American consumer prices are increasing at an annual pace that is faster than June 1982.

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) increased 6.8% over the past year.

The price of petrol rose 6.1% while second-hand cars, food, and rent also increased.

This month, however, the pace at which prices rose in November was 0.8%. It was 0.9% for October.

Rising inflation is putting pressure on President Biden’s political agenda as he tries to pass his $1.9tn (£1.4tn) social spending bill.

The president tried to dampen the effect of the new figures before they were released. He stated that the data wouldn’t reflect the recent drop in energy prices.

President said that “the information to be released tomorrow about energy in November doesn’t reflect today’s reality” and also didn’t reflect expected price declines in the coming weeks and months, like in the auto industry.

  • US job growth far less than expected

For President Biden, inflation has been a potential problem. The effect is felt by ordinary citizens directly. Some economists attribute the President’s spending programs, which were designed to provide support during the Covid pandemic and contribute to price hikes.

But, supply chain bottlenecks remained an important source of inflationary tension, according to Caleb Thibodeau from Validus Risk Management.

He said that “Despite this, President Biden’s political pressure has increased tremendously and thus the Fed,”

He stated that more than half the 6.8% figure was made up of fuel, shelter, used vehicles, and other resources. He said, “These factors could be eased quickly, as we’ve seen in the oil market recently, but are persistent for the moment.”

The CPI index has increased 4.9% year-on-year, up from 4.6% October.

The combination of increased demand from consumers as well as supply chain issues caused inflation. However, disruptions eventually stopped the inflation.

‘Longer-term problems’

However, many economists are convinced that inflation is likely to persist for longer due to price increases in a wide range of goods as well as rises rents and wages.

Recently, both Janet Yellen, Treasury Secretary and Federal Reserve Chair Jerome Powell stated they wouldn’t refer to inflation anymore as “transitory”.

Federal Reserve reduces the amount of bond-buying assistance it offers each month. This opens the door to a potential rise in interest rates next fiscal year.

Inflation has risen to a point that speculations have been fueled that Powell might accelerate his tapering and raise rates faster.

The cost of living keeps rising, but all existing support programs have ended and no new ones were introduced. That will reduce consumer confidence. Robert Alster from Close Brothers Asset Management said, “The rising rental equivalent cost continues to spiral in a background, which indicates longer-term inflationary difficulties.”

Omicron’s arrival this month means that the world economy is in serious trouble. The Fed will only know the extent of the effects and the consequences.

Source: BBC.com

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