Dec 10, 2021 - Economy & Business

Inflation hits highest level in nearly 40 years

Source: U.S. Bureau of Labor Statistics; Chart: Axios Visuals
Source: U.S. Bureau of Labor Statistics; Chart: Axios Visuals

The core Consumer Price Index, the measure of the price of goods and services excluding food and energy, increased 0.5% in November, according to data released Friday.

Driving the news: The headline CPI figure, which measures the price of all items, rose 6.8% over the last 12 months, marking the biggest jump in 39 years.

  • Overall prices rose .8% for the month, higher than the .7% increase expected by economists, according to Fact Set.
  • The 0.5% monthly increase for the core CPI is aligned with economist predictions for a 0.5% uptick.

Between the lines: Energy prices rose 33.3% since November of last year, including a 3.5% increase in November.

  • Gasoline prices alone also rose, with a 6.1% increase in November (the same increase as in October) and a 58.1% increase over the last 12 months.
  • The price indexes for rent also rose 0.4% in November compared with the month before.

The big picture: Friday's data from the Bureau of Labor Statistics comes after the inflation reading from last month revealed that price gains were picking up steam faster than expected.

  • Overall prices in October were up 6.2% from a year prior.

President Biden in a statement on Friday said: "Today’s numbers reflect the pressures that economies around the world are facing as we emerge from a global pandemic — prices are rising."

  • "But developments in the weeks after these data were collected last month show that price and cost increase are slowing, although not as quickly as we’d like," he added.
  • "The challenge of prices underscores the importance that Congress move without delay to pass my Build Back Better plan, which lowers how much families pay for health care, prescription drugs, child care, and more."

Our thought bubble, via Axios' Kate Marino: A hot inflation reading was largely expected — but the 6.8% headline increase was a tick higher than the 6.7% expected, per FactSet.

  • Though many economists still expect the monthly gains to moderate during the first half of next year, today's print will amp up the pressure on the Federal Reserve to act faster to cool growth when its committee meets next week.
  • Likely on the Fed's agenda for the meeting: a discussion of more quickly tapering its bond market purchases, which began as an emergency market support mechanism at the outset of the pandemic. Once the taper is concluded, officials may begin the process of raising interest rates from their current rock bottom levels.

What they're saying: "Inflationary pressures are building in the economy and that is going to force the Fed’s hand," wrote Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, in a note.

Go deeper ... CPI: The new jobs number

Editor's note: This story has been updated with comment from President Biden.

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