US consumer prices rise at fastest annual pace in almost 40 years

Washington: US consumer prices in November rose at the fastest annual pace in almost 40 years, increasing pressure on the Federal Reserve to tighten monetary policy, the US Labor Department reported on Friday.

The consumer price index (CPI) last month rose 0.8 percent from the previous month and 6.8 percent from a year earlier, the largest 12-month increase since the period ending June 1982, the department said.

The so-called core CPI that excludes food and energy costs rose 4.9 percent over the last 12 months, while the energy index rose 33.3 percent over the last year and the food index increased 6.1 percent, according to the department.

“Pressures remain broad based, with supply chains still struggling to meet turbocharged demand for goods, and services inflation only recently beginning to reflect the pandemic’s effects on housing costs,” Sarah House and Michael Pugliese, economists at Wells Fargo Securities, said Friday in an analysis.

“We expect headline CPI to peak on a year-ago basis at about 7% in the first quarter before base effects get tougher come spring. Monthly gains should continue to trend lower as the acute pressures from goods inflation begins to ease up and offsets the emerging momentum in services inflation,” they said, estimating that headline and core CPI will still be above 3 percent year-over-year this time next year.

“We therefore look for the Fed to announce accelerating its wind-down of asset purchases at its meeting next week and to then raise the fed funds rate 50 bps (basis points) in the second half of 2022,” they noted.

The Fed has pledged to keep the federal funds rate unchanged at the record-low level of near zero since the start of the pandemic. Meanwhile, the central bank began last month to reduce its monthly asset purchase program of 120 billion U.S. dollars by 15 billion dollars. At this pace, the Fed would end its asset purchases by June next year.

But some Fed officials and economists have urged the central bank to accelerate the pace of tapering to give more leeway to raise rates sooner amid inflation pressures.