Tags: inflation | cpi | biggest spike since december 1981

US Inflation Soars to 8.5%, Biggest Spike Since 1981

inflation
(Dreamstime)

Tuesday, 12 April 2022 08:34 AM EDT

At 8.5%, inflation soared over the past year at its fastest pace in more than 40 years, with costs for food, gasoline, housing and other necessities squeezing American consumers and wiping out the pay raises that many people have received.

The Labor Department said Tuesday that its consumer price index jumped 8.5% in March from 12 months earlier — the biggest year-over-year increase since December 1981. Prices have been driven up by bottlenecked supply chains, robust consumer demand and disruptions to global food and energy markets worsened by Russia’s war against Ukraine.

The government’s report also showed that inflation rose 1.2% from February to March, up from a 0.8% increase from January to February.

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The March inflation numbers were the first to capture the full surge in gasoline prices that followed Russia’s invasion of Ukraine on Feb. 24. Moscow’s brutal attacks have triggered far-reaching Western sanctions against the Russian economy and have disrupted global food and energy markets. According to AAA, the average price of a gallon of gasoline — $4.10 — is up 43% from a year ago, though it has fallen back in the past couple of weeks.

The escalation of energy prices has led to higher transportation costs for the shipment of goods and components across the economy, which, in turn, has contributed to higher prices for consumers.

The latest evidence of accelerating prices will solidify expectations that the Federal Reserve will raise interest rates aggressively in the coming months to try to slow borrowing and spending and tame inflation. The financial markets now foresee much steeper rate hikes this year than Fed officials had signaled as recently as last month.

With ever-rising costs for food, gasoline, housing and other necessities squeezing consumers and threatening the economy, inflation in the United States likely set yet another four-decade high in March.

The 8.5% figure for March surpass the 7.9% 12-month increase in February, which itself set a 40-year high.

Economists have also forecast that from February to March, consumer prices jumped 1.1%. That would be the sharpest month-to-month jump since 2005.

US Economy Still on Solid Footing

The central bank’s rate increases will make loans sharply more expensive for consumers and businesses. Mortgage rates, in particular, though not directly influenced by the Fed, have rocketed higher in recent weeks, making home buying more expensive. Many economists say they worry that the Fed has waited too long to begin raising rates and might end up acting so aggressively as to trigger a recession.

For now, the economy as a whole remains solid, with unemployment near 50-year lows and job openings near record highs. Still, rocketing inflation, with its impact on Americans' daily lives, is posing a political threat to President Joe Biden and his Democratic allies as they seek to keep control of Congress in November’s midterm elections.

Economists generally express doubt that even the sharp rate hikes that are expected from the Fed will manage to reduce inflation anywhere near the central bank's 2% annual target by the end of this year. Tilley, Wilmington Trust economist, said he expects year-over-year consumer inflation to still be 4.5% by the end of 2020. Before Russia's invasion of Ukraine, he had forecast a much lower 3% rate.

In Tuesday’s government report, even excluding volatile food and energy prices, so-called core inflation for the past 12 months is expected to have hit 6.6%, according to the FactSet survey. That would be the biggest such year-over-year jump since August 1982.

Inflation, which had been largely under control for four decades, began to accelerate last spring as the U.S. and global economies rebounded with unexpected speed and strength from the brief but devastating coronavirus recession that began in the spring of 2020.

The recovery, fueled by huge infusions of government spending and super-low interest rates, caught businesses by surprise, forcing them to scramble to meet surging customer demand. Factories, ports and freight yards struggled to keep up, leading to chronic shipping delays and price spikes.

Biden $1.9 Trillion Stimulus

Critics also blame, in part, the Biden administration’s $1.9 trillion March 2021 stimulus program, which included $1,400 relief checks for most households, for helping overheat an already sizzling economy.

Many Americans have been receiving pay increases, but the pace of inflation has more than wiped out those gains for most people. In February, after accounting for inflation, average hourly wages fell 2.5% from a year earlier. It was the 11th straight monthly drop in inflation-adjusted wages.

[Urgent: A powerful report not only predicted Biden’s hyper-inflation, its reveals the 3 steps you can take to actually grow your wealth during this time, See REPORT – CLICK HERE NOW]

© Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


StreetTalk
At 8.5%, inflation soared over the past year at its fastest pace in more than 40 years, with costs for food, gasoline, housing and other necessities squeezing American consumers and wiping out the pay raises that many people have received.
inflation, cpi, biggest spike since december 1981
808
2022-34-12
Tuesday, 12 April 2022 08:34 AM
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