Inflation appears to have officially moved into the U.S. economy. Consumer prices rocketed higher than expected last month, jumping 6.2% annually for their biggest increase in 31 years, the Labor Department said Wednesday.
An increase in the consumer price index (CPI) means everything from gas bills and healthcare to groceries and rents is getting more expensive.
Fuel oil prices climbed 12.3% last month and are now up 59.1% compared to last year.
Energy prices overall rose 4.8% in October and are up 30% for the 12-month period.
Meat, poultry, fish, and eggs increased 1.7% last month and have climbed 11.9% for the year.
Stock market futures also fell following the report and bond yields rose.
On the flip side, there is good news for anyone planning a vacation as prices for alcohol and airline tickets fell.
How did we get to such inflation figures?
Truth is, the economic reopening from the pandemic caused all sorts of disruptions—from labor shortages to supply chain bottlenecks—which have contributed to rising prices.
With inflation coming in above 5% for five straight months now, many Americans are getting a little freaked out, and they are looking to policymakers for answers.
Officials are also frustrated with the scary inflation figures.
“I had expected to see more progress by now,” Chicago Fed President Charles Evans acknowledged this week.
Also Read: Nonfarm Payrolls: U.S. Adds 531,000 Jobs in October, Beats Expectations
The data comes as policymakers maintain that the current price pressures are temporary and related to COVID-19 pandemic-specific issues. While they have conceded that inflation has been more persistent than they expected, they see conditions returning to normal over the next year or so.
However, the Fed now believes that inflation will run hot well into next year, which has bolstered its plan to hike rates and cool down the economy. It’s already planning to reduce its monthly bond purchases that propped up markets during the pandemic.
Treasury Secretary Janet Yellen stressed on Tuesday that officials won’t let inflation get as out of control as it did during the 70s and 80s. “That isn’t happening now and the Federal Reserve wouldn’t permit that to happen,” she said. But it’s being put to the test.
What’s next for the market?
