The Labor Department reported December’s consumer price index today — and it wasn’t pretty. Inflation was up 7% YoY in December. The last time the CPI rose that quickly was 40 years ago, in 1982.
The consumer-price-index (CPI) measures how much Americans pay for goods and services. In November, the CPI was up 6.8% YoY, so the December report represents a 0.2% month-over-month increase in inflation. Similarly, the core price index (basically the CPI, just excluding food and energy categories) saw a 5.5% YoY increase in December. Economists are in agreement that the inflation hike is probably the consequence of labor and supply shortages, the high price of energy products, increased cash flow from Congress/the Fed, and Omicron (of course)… ugh.
Mike Loewengart, a director for E-trade investment strategy, shared “This morning’s CPI read really only solidifies what we already know: Consumer wallets are feeling pricing pressures and in turn the Fed has signaled a more hawkish approach. But the question remains if the Fed will pick up the pace given inflation is seemingly here to stay, at least in the medium-term.”
In 1980, inflation reached a peak of 14.8% under Jimmy Carter’s presidency. Like today, the Fed Chair in the early 80s, Paul Volcker, made it his mission to squash inflation. Volcker raised interest rates to 19% in 1981, prompting a recession — however, in 1982, both interest rates and inflation began to fall dramatically. Volcker is still remembered as somewhat of a legend who killed double-digit inflation. 🔪 📉
The prices of cars/trucks surged 37.3% in December, furniture prices hiked 17.3%, and 49% of small businesses surveyed in December will increase prices of goods/services in 2022. So is there any good news…?
Some economists (and the Fed!) anticipate that inflation will slow down in 2022 as supply/labor shortages are resolved. Hopefully Omicron doesn’t thwart our progress. 🤞