In US Inflation Goes High After 4 Decades Soared to 7.5%

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The inflation rate in the United States soared in January to 7.5% – five-tenths above that of December – the Bureau of Labor Statistics reported on Thursday. This is the largest year-on-year rise since February 1982 and is even above the predictions of most analysts, who expected prices to rise by 7.3%.

As for the monthly increase, consumer prices grew in January six-tenths compared to those of December, according to this statistic. Excluding food and fuel prices, which are the most volatile, core inflation in January was 0.6%, with a year-on-year rate of 6%. Energy prices (which include gasoline, crude oil, electricity, and natural gas) rose in January by 0.9 percent, the same percentage as food prices rose, according to the government report.

Within the food segment, the price of purchases in supermarkets rose by 1% and that of food in restaurants, by 0.7%. Thursday’s data adds pressure to the Federal Reserve (Fed, responsible for dictating US monetary policy), which has a dual mandate of promoting full employment and price stability.

Fed Chairman Jerome Powell is running for a second term at the helm of the fed and has already announced on several occasions that the fed’s priority at this time is the fight against high inflation, even if that means placing less emphasis on the institution’s other goal, full employment.

Tasa subyacente

Even in the underlying rate, which is more monitored by financial institutions, the increase does not lose strength. At the month-on-month rate, a fattening rate of 0.6% is achieved by eliminating the effects of food and energy in the shopping basket.

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If the reference is for the last 12 months, the increase is 6% compared to 5.5% a month ago. Its highest rate in this case for 31 years. And, in case there were any doubts about the magnitude of this figure, it is worth mentioning that in the decade before the outbreak of the pandemic this core inflation averaged around 1.5%.

What went up in price?

Prices increased across the board, including housing, furniture, used cars, and medical costs. Food had a price increase of 0.9% in January, compared to just 0.5% in December. Almost all grocery prices increased, and only non-alcoholic beverages remained stable. Energy prices also rose 0.9% last month, driven by electricity costs. On the other hand, hotel prices fell, most likely due to travel plans that were canceled during the increase in cases of covid-19 due to the ómicron variant.

For the Federal Reserve, which must keep prices stable, January’s report likely won’t change much. The central bank began scaling back its pandemic stimulus program late last year and signaled it will raise interest rates for the first time since COVID-19 began at its March meeting.

However, this is not the only indicator of inflation that reaches record levels. In January, the producer price index, which tracks what U.S. producers are paid for their goods and services on average, rose 9.7% last year without seasonal adjustments. This was the largest increase in a calendar year since the data series began recording in 2010, according to the Bureau of Labor Statistics. Although it was a slightly smaller advance than economists predicted. But, it represents a 9.6% rebound recorded during the 12 months ending in November.

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