Consumer Price Index jumps 7.5%.
QUICK FACTS:
- U.S. consumer prices rose in January, leading to the biggest annual increase in inflation in 40 years, Reuters reports.
- In the 12 months through January, the Consumer Price Index (CPI) jumped 7.5%, the biggest year-on-year increase since February 1982.
- The Labor Department on Thursday said the broad increase in prices was led by soaring costs for rents, electricity and food.
- The consumer price index gained 0.6% last month after a similar increase in December, Reuters notes.
- The food index rose 0.9%, as the cost of food consumed at home increased 1.0%.
- There are also increases in the prices of cereals, bakery products, dairy, fruits, and vegetables.
- Meat prices rose moderately, too.
- Electricity prices jumped 4.2%.
REASON FOR THE INCREASE:
- The economy is grappling with high inflation, caused by a shift in spending to goods from services during the COVID-19 pandemic.
- Trillions of dollars in pandemic relief allowed for more spending as well as inflation, which ran against capacity constraints as the coronavirus sidelined workers needed to produce and move goods to consumers, according to Reuters.
BACKGROUND:
- The rise in prices will likely lead to an interest rate hike from the Federal Reserve next month, Reuters notes.
- “While this report, on its own, might not trigger a 50 basis points inaugural rate hike from the Fed, the pressure will continue to mount if inflation doesn’t begin to rollover this spring as policymakers anticipate,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
- U.S. stocks opened lower too, according to Reuters.
