Inflation in the United States ended 2021 with an accumulated high of 7%, the highest value in almost four decades, according to data released this Wednesday (12). The result may reinforce expectations that the Fed (Federal Reserve, the American central bank) will start raising interest rates as early as March.
The increase in the accumulated in 12 months is the largest observed since June 1982. In terms of monthly variation, the consumer price index rose 0.5% in December compared to November, after rising 0.8% in November, informed the Department of Labor Statistics.
Economists polled by Reuters had forecast a 0.4% rise for the index on the month and a 7% jump year-on-year.
The US economy is facing high inflation as the Covid-19 pandemic clogs supply chains and the country faces wage pressures. The US government reported last Friday (7) that the unemployment rate in December fell to 3.9%, the lowest value in 22 months, suggesting that the labor market is at or close to full employment.
The high cost of living is weighing on President Joe Biden’s approval rating. US inflation is well above the Fed’s 2% target.
Commenting on the data, the American president stressed that his administration is “making progress in slowing the rate of price hikes”, but acknowledged that the result reinforced that “there is more work to be done”, with price hikes still at levels very high pressure on the family budget.
To fight inflation, the White House has sought to reduce bottlenecks at key ports, tackle anti-competitive behavior in some sectors, such as meat, and encourage greater oil production globally. On the other hand, the US government has avoided other measures that could hold down prices, such as removing tariffs on imports from China.
“The list of reasons for the Fed to start removing its expansionary monetary policy is growing,” said Ryan Sweet, senior economist at Moody’s Analytics. “Inflation would need to decelerate quickly to take some of the pressure off the Fed, and that’s unlikely to happen.”
Excluding the volatile food and energy components, the index rose 0.6% last month after rising 0.5% in November.
In the 12 months through December, the so-called core consumer price index accelerated to 5.5%. That was the biggest annual gain since February 1991, after rising 4.9% in November.
Core inflation is being driven by rising prices for services, such as rents, and scarce goods, such as vehicles — the value of used cars is up 40% in the 12 months through December. At the other end, energy and gasoline costs fell in the month compared to November.
For analysts, the index’s core rate from a year earlier is expected to peak in February.
“The first quarter is expected to see a spike in inflation, with lower energy prices and a decline in food and auto inflation allowing for a slower rise in prices for the remainder of the year,” said David Kelly, chief global strategist at JPMorgan Funds. in New York.
The data was released a day after Jerome Powell, chairman of the Fed, warned in a speech that inflation is a “serious threat” to the recovery of the labor market, reinforcing the intentions of the American central bank to reduce interest rates.
“The Fed is currently behind schedule, so the urgency you hear in Powell’s voice when commenting on inflation is him chasing it,” says Tom Porcelli, chief US economist at RBC Capital Markets.
In the opinion of Eric Winograd, senior fixed income economist at AllianceBernstein, there is nothing in the data released on Wednesday to suggest that inflation is dissipating significantly.
Raising interest rates to fight inflation could deepen inequality, says IMF
Interest rate hikes aimed at fighting inflation could exacerbate the “dangerous” and “deepening” economic divergence between advanced and developing economies, IMF Managing Director Kristalina said on Wednesday. Georgieva.
Georgieva said that inflation is not a universal phenomenon, but it is a problem in many countries, especially in the United States.
At an event hosted by the Center for Global Development, she said the Fed and other central banks know how to deal with inflation, but that task can be a delicate balancing act.
“The contagion effect in emerging markets could add fuel to the fire of divergence [econômica]”, he stated.
(Com Financial Times)
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