Inflation, which many economists, including those in the White House and the Federal Reserve, considered a transitory phenomenon, became “public enemy number one” according to various polls.
The inflation target of the Fed is located at 2% per year, well below the record published yesterday.
December
In December, however, inflation slowed compared to November, to 0.5% from 0.8%, according to the consumer price index released Wednesday by the Labor Department. But the underlying was higher in December than in November –0.6% versus 0.5% respectively–.
The index that specifically measures energy prices “fell back in December” and thus ended with “a long series of increases,” the Labor Department statement said.
In December, it was mainly house prices and used cars that increased the most. Food “also contributed” to the rise, “although they rose less than in recent months,” the report highlighted.
Danger
The omicron variant of the new coronavirus, which is causing records of infections and hospitalizations in the country, could drive prices higher. The high number of infections leads workers to quarantine and thereby hit production and product delivery, which in turn affects demand and puts pressure on prices.
Fed Chairman Jerome Powell, who had his Senate confirmation hearing on Tuesday for a second term, vowed to act if record inflation persists into the second half of this year. The agency is willing to increase its rates more than expected.
If the inflationary push continues beyond the middle of the year, “we will react accordingly,” said Powell, who defined the fight against inflation as a priority.
“The return to normality will take time,” he warned however, at a time when the agency’s benchmark rates are close to zero.
“To ensure sustainable expansion (of the economy), we must have price stability,” Powell continued in his remarks to lawmakers.
Source From: Ambito
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