Inflation went into overdrive in October, pushing up U.S. consumer prices by 6.2 percent compared to a year ago in the fastest annual increase since 1990, according to Labor Department statistics.
The pace of inflation ate away at workers’ ability to pay for food, shelter, electricity and cars, despite rising wages, removing any doubt that higher prices will be around for a while in the pandemic recovery. But inflation is spreading out beyond categories associated with reopening the economy.
The consumer price index (CPI) rose 0.9 percent from September, the biggest gain in four months, exceeding estimates in a Bloomberg survey of economists.
Over the last 12 months, the energy index rose 30 percent and the food index increased 5.3 percent, the Bureau of Labor Statistics reported.
During October alone, the energy index rose 4.8 percent, the gasoline index increased 6.1 percent and other major
energy component indexes rose too for the month. The food index increased 0.9 percent in October.
Medical care, household furnishing and operations, and recreation all increased in October. The indexes for airline fares and alcoholic beverages were among the few to decline over the month.
Stocks opened lower on the news, while the yield on the 10-year Treasury rose and the dollar strengthened.
As demand keeps rising for goods and services, businesses have been increasing prices while supply chain issues and a shortage of workers are also helping to push up the costs of almost everything.
Consumer price index reports are closely watched by economists, Wall Street investors, and the Federal Reserve, whose main job is to maintain price stability. The latest reported inflation rate far exceeds the 2 percent annual gains the Fed hopes for on average.
The high inflation gives Republicans ammunition to argue against President Joe Biden’s policies, New York Times reported.
The steep increase in prices suggests higher inflation will be around longer than previously thought, putting pressure on the Fed to end near-zero interest rates sooner than expected and potentially speed up the pace of the bond-buying taper announced last week, according to Bloomberg.
Despite pay raises in 2021, “real” compensation for employees is expected to fall in 2021 thanks to inflation, the Society for Human Resource Management reported. The median total U.S. salary increase budgets for 2021 are 3 percent, on par with the previous 10 years, but rising prices mean higher salaries aren’t likely to keep pace with inflation.
“Inflation hurts Americans pocketbooks, and reversing this trend is a top priority for me,” Biden said in a statement, adding that his administration is working on how to reduce those costs.
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