December inflation in the United States reached 7%, the highest level in 40 years

The annual rate of inflation in the United States rose in December to 7% —Two tenths above that of November—, the Bureau of Labor Statistics reported on Wednesday.

According to this report, however, the rise in prices slowed compared to November, and rose 0.5%, compared to 0.8% the previous month.

It is the highest inflation since 1982, the latest evidence that rising prices for food, rent and other necessities are increasing financial pressures of American households.

Housing, one of the main items behind inflation in the United States. Photo: AFP

Inflation has triggered during recovery from the pandemic recession, as Americans have increased spending on goods like cars, furniture, and appliances.

This increase has generated traffic jams at ports and warehouses, as well as exacerbating shortages of semiconductors and other parts.

Housing and cars, in the lead

If food and fuel prices, which are the most volatile, are excluded, underlying inflation in December was 0.6 Energy prices fell in December for the first time in several months, by 0.4%, while those of food rose 0.5%, according to the government report.

The main drivers behind the sharp rise in prices were the second-hand vehicles and housing.

The gasoline prices have increasedIn part, because Americans have been driving more in recent months, having cut travel and commute at the start of the pandemic.

Priority for the Federal Reserve

This Wednesday’s data adds pressure to the Federal Reserve (Fed, which is responsible for dictating US monetary policy), which has a dual mandate to promote full employment and price stability.

Fed Chairman Jerome Powell is running for a second term at the helm of the agency and in his appearance Tuesday in the Senate stressed that the agency’s priority at this time is fighting high inflationeven if this means putting less emphasis on the goal of full employment.

The Chairman of the Federal Reserve, Jerome Powell.  Photo: AP

The Chairman of the Federal Reserve, Jerome Powell. Photo: AP

«There is no legal basis to prefer full employment to price stability or vice versa. They are the same. However, at different times one of them may deviate more from the objective and that is where we should focus a little more,» he explained Powell in his speech.

«Sometimes it is full employment and sometimes it is inflation. I think now is inflationn, «added the Fed chairman.

Asked about the possibility, pointed out by several central bank governors, that throughout 2022 there will be between three and four increases in interest rates, Powell limited himself to answering that the agency will use all the tools at its disposal.

Source: AP and EFE