Inflation surged 7% in December

Biden gaff: Last week, President Harris and I stood in the United States Capitol… (Townhall/Twitter)

This was the fastest increase since June 1982. This increase is working against wage and salary gains that many in the workforce recently made. There are expectations that interest rates will be raised to help counter inflation.

From Fox News:

In a statement following the data release, Biden touted the decline in month-over-month inflation — at 0.5%, it was down slightly from the 0.8% increase in November — as evidence of a “meaningful reduction in headline inflation” and demonstrative of falling food and gas prices.

“At the same time, this report underscores that we still have more work to do, with price increases still too high and squeezing family budgets,” the president said. “Inflation is a global challenge, appearing in virtually every developed nation as it emerges from the pandemic economic slump. America is fortunate that we have one of the fastest-growing economies.”

The eye-popping reading — which marked the seventh consecutive month the gauge has been above 5% — will likely amp up pressure on the Federal Reserve to begin hiking interest rates as soon as March in order to combat the recent price surge. Hiking interest rates tends to create higher rates on consumers and business loans, which slows the economy by forcing them to cut back on spending.

“The Federal Reserve will most likely raise interest rates earlier than anticipated to control inflation,” said Dawit Kebede, senior economist at the Credit Union National Association. “This is in addition to ending its support for the economy in the form of large asset purchases. This will raise the cost of borrowing for consumers and will reduce excess demand for goods.”

Chairman Jerome Powell has already signaled the U.S. central bank plans to speed up its withdrawal of support for the U.S. economy in order to combat inflation, which has been higher and longer lasting than policymakers initially expected.

“As we move through this year, if things develop as expected, we’ll be normalizing policy, meaning we’re going to end our asset purchases in March, meaning we’ll be raising rates over the course of the year,” Powell told the Senate Banking Committee during his confirmation hearing on Tuesday. “At some point perhaps later this year we will start to allow the balance sheet to run off, and that’s just the road to normalizing policy.”

Fox News has the rest of the article here.

Category: Economy, Society