US prices are rising more than they have in 30 years

During the past 12 months, prices rose 6.2%, the largest increase since November 1990.

Excluding food and energy prices, which tend to be more volatile, the index rose 4.6% over the same period, the biggest jump since August 1991.

The headline price index rose 0.9% in October alone, adjusted for seasonal changes, significantly more than economists had predicted of 0.6%, and dwarfing the warmest 0.4% increase since September.

Excluding food and energy, prices rose 0.6% last month, more than in September.

Last month’s price increases were due to increases in multiple categories, including energy, shelter, food and automobiles. Food prices have risen almost 1% for two months in a row.

Energy costs have skyrocketed, rising 4.8% in October and 30% in the last 12 months.

Pandemic price increases

Rising inflation has been a hallmark of the recovery from the pandemic thanks to a powerful combination of unbridled demand, shortages of raw materials and bottlenecks along global supply chains. And the jump in energy costs is only making it worse.

America’s inflation problem is likely to be made worse by the huge stimulus boost Washington provided for the nation to weather the worst of the pandemic, which boosted savings, household wealth, and ultimately demand. according to Rick Rieder, director of global fixed income investments at BlackRock.

“Increasing employment will continue to be a major factor in the continued strength of demand for goods and services, and higher wages will be a story that will continue for many months to come,” he said.

The Biden administration and the Federal Reserve have been adamant that price increases are temporary and expected as the economy recovers from its worst crisis in a generation.

But in a statement On Wednesday, President Joe Biden said that “inflation hurts the pockets of Americans and reversing this trend is a priority for me.”

Biden also pointed to rising energy costs and said natural gas prices have already dropped.

Last week, Treasury Secretary Janet Yellen told CNN that although inflation is high, it is nowhere near as bad as the inflation peak of the 1970s, when the United States was in a state of stagflation, defined by rising prices and slow growth.

What is the Fed going to do?

the The Federal Reserve is starting to slow down of its pandemic-era stimulus, starting with reducing the monthly pace of asset purchases. That could ease the economy a bit. After all, keeping prices stable is one of the main tasks of the central bank.

But the warmer-than-expected October report raises the question of whether the Fed is acting fast enough or whether it needs to reverse the stimulus even faster.

Although a month is not trending and October’s price jumps could be short-lived, the reverse could also be true.

American consumers are already preparing for higher prices during their holiday shopping.

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