US Inflation Hits 7% Over December

US Inflation Hits 7% Over December

Wednesday 12th January 2022 – 13:55 (GMT)

Figures released by the US Bureau of Labor Statistics have shown consumer prices continued to push higher over December, further fuelling concerns that the world’s largest economy is overheating.

The latest CPI reading of 7% is the highest in almost four decades and comes against a backdrop of record government fiscal support, supply chain bottlenecks and increased spending following the successful nationwide rollout of coronavirus vaccinations.

Core inflation, which strips out volatile food and energy costs, hit its highest year-on-year level since 1993 – up 5.5% in December from 4.9% in November.

The news follows comments from Federal Reserve Chair Jerome Powell earlier this week where he moved away from describing current levels as “transitionary” and all but confirmed further interest rate raises by the central bank.

Powell told Congress: “What we have now is a mismatch between demand and supply. We have a very strong demand in areas where supply is constrained” and “If we see inflation persisting at high levels longer than expected and we have to raise interest rates more over time, we will.”

GBP/USD and EUR/USD both moved to the higher end of the recent range following the data with attentions now turning to the Federal Reserve meeting later this month. A rise in base rates from 0.25% to 0.5% is now anticipated, however a bigger move could be required to help stem inflation and keep the US economy on track.