U.S. consumer prices rose last month at the fastest annual pace in nearly 40 years, magnifying how rapid and persistent inflation is eroding paychecks and increasing pressure on the Federal Reserve to tighten monetary policy.
The consumer price index climbed 6.8% from November 2020, according to Labor Department data released Friday. The widely followed inflation gauge rose 0.8% from October, exceeding forecasts and extending a trend of sizable increases that began earlier this year.
The median forecasts in a Bloomberg survey of economists called for a 6.8% annual gain and a 0.7% advance in the monthly measure. The yield on 10-year Treasuries slid while S&P 500 index futures gained and the dollar was little changed as the figures were generally not worse than expected.
The increase in the CPI reflected broad advances in most categories, similar to last month’s report. Gasoline, shelter, food and vehicles were among the larger contributors to the month-over-month increase.
The data reinforce expectations the Fed will accelerate the wind down of its bond-buying program at the central bank’s final meeting of the year next week. Central banks — and politicians — around the world have come under mounting pressure to address rising inflation as workers spend more at the grocery store and the gas pump.
The figure “just keeps pressure on the Federal Reserve,” Kathy Bostjancic, chief U.S. financial economist at Oxford Economics, said on Bloomberg Television. “This is a very difficult spot for them.”
Inflation “is going to stay hot and sticky through the first quarter,” she said.
A faster tapering would open the door for the Fed to begin raising interest rates. At the same time, investors pared bets on the steepness of Fed hikes in 2022, indicating Friday’s data showed stronger chances that inflation will slow given the monthly change was smaller than in October.
Annual CPI increases are anticipated to hover near 7% into 2022.
Excluding the volatile food and energy components, so-called core prices rose 0.5% from the prior month. The core CPI was up 4.9% from a year earlier, a fresh 30-year high.
Shelter costs — which are considered to be a more structural component of the CPI and make up about a third of the overall index — rose 0.5% in November from a month earlier.
Compared with the same month last year, the 3.8% gain was the biggest since 2007. Housing costs are anticipated to drift higher next year as surging rents and home prices feed into the measure.
Household furnishings, apparel and airfares also contributed to the increase in inflation.
Rising prices for necessities are adding up for Americans:
— Food at home rose 6.4% from a year ago, the most since December 2008
