Topline
Consumer prices rose 7.5% in the 12 months ending in January, according to data released Thursday by the Labor Department, climbing more than economists expected amid an inflationary surge that’s pushed the Federal Reserve to ease its pandemic-era stimulus more quickly than previously anticipated.
Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a Senate Banking, Housing and … [+]
Key Facts
Overall prices rose 0.6% from December—higher than the 0.4% economists were expecting and the previous month’s increase of 0.5%.
On a yearly basis, prices jumped 7.5% last month, the largest annual increase since February 1982.
The overall increase was the result of broad gains across food, electricity and shelter prices, the government said, pointing to a 0.9% monthly increase in the price of energy as a main driver.
Key Background
Trillions of dollars in unprecedented government spending helped keep the economy afloat during the pandemic, but levels of historically high inflation have rattled the market in recent months—and even more so in the new year. After rising 27% in 2021, the benchmark S&P 500 index is down more than 4% so far this year Bank of America and Morgan Stanley are among the Wall Street investment banks that have warned inflation—and not the pandemic—is now the biggest risk to the market. The Federal Reserve, meanwhile, has started to taper, or reduce, its accommodative monetary policy efforts in an effort to combat rising prices, and it forecasts three interest rate hikes this year. Last month, the International Monetary Fund downgraded its U.S. economic growth projections from 5.2% to 4%, citing, among other things, the Federal Reserve’s removal of pandemic-era stimulus.
What To Watch For
A detailed summary of last month’s Fed meeting is set to be released next Wednesday and should provide more clarity on how officials are navigating the decades-high surge in inflation, with the central bank’s next two-day policy meeting slated to end on March 17.
Further Reading
Tech Stocks Rebound Ahead Of ‘Not As Bad As Feared’ Inflation Report (Forbes)
IMF Warns Economic Recovery Will Be Worse Than Expected After U.S. Inflation Surge And China Covid Disruptions
Stocks Surge After Powell Says Fed Not Afraid To Raise Rates Further If Higher Inflation Persists (Forbes)
The Best Investing Strategies For Inflationary Times (Forbes)
Source: https://www.forbes.com/sites/jonathanponciano/2022/02/10/inflation-spiked-75-in-january-hitting-40-year-high/