Prices in the U.S. are rising at their fastest rate in almost 40 years, with inflation up 7% year-on-year in December. Strong demand and scarce supply for key items such as cars are driving the increases, which are putting pressure on policymakers to act.
The U.S. central bank is expected to raise interest rates this year.
December’s increase marked the third month in a row that the U.S. annual inflation rate has hovered above 6% – well north of policymakers’ 2% target. The last time the pace of inflation exceeded that level was 1982.
Wednesday’s report from the Labor Department showed signs that some of the pressures may be easing. The cost of energy dropped 0.4% from November to December – its first decline since April. But over 12 months energy costs are up by nearly 30% and have returned to their upward trend in recent days.