According to a new report released today by the Bureau of Labor Statistics, consumer price inflation has reached annual heights not seen since 1982. Based on a snapshot of the consumer price index taken last month, which monitors the state of inflation based on the cost of particular recurrent purchases and necessities, consumer prices rose by approximately 7% between December 2020 and December 2021.
While this is undoubtedly a worrying statistic, it is still within expectations of economists and analysts who have been charting the flow of the economy during the COVID-19 pandemic. Since the statistic is still within the realm of expectation, the report actually caused a slight rise in general stock values.
“The December CPI report of a 7% increase over the last 12 months will be shocking for some investors as we haven’t seen a number that high,” Brian Price, head of investment management at Commonwealth Financial Network, told clients. “However, this print was largely anticipated by many, and we can see that reaction in the bond market as longer-term interest rates are declining so far this morning.”
BREAKING: Prices paid by U.S. consumers jumped 7% in December from a year earlier, the highest inflation rate since 1982. It’s the latest evidence that rising costs for food, gas, rent and other necessities are heightening the pressures on U.S. households. https://t.co/9rDFhRIKgl
— The Associated Press (@AP) January 12, 2022
To combat the inflation, the Federal Reserve is expected to raise interest rates, as well as make several other policy adjustments depending on factors like the state of the job market.
“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,” Mike Loewengart, managing director for investment strategy at E-Trade, said in a letter. “With Covid cases continuing to rise, the impact on the supply chain and labor shortages could persist, which only fuels higher prices.”