Consumer prices in the United States rose steadily in December, with substantial rises in rental housing and used automobiles, resulting in the greatest annual increase in inflation in almost four decades, bolstering anticipation that the Federal Reserve may begin hiking interest rates as soon as March.
The Job Department’s report came on the heels of statistics released last week that showed the labor market was at or near full employment. In testimony before the Senate Banking Committee on Tuesday, Fed Chair Jerome Powell said the bank was ready to do whatever it took to avoid high inflation from getting “entrenched.” Powell is seeking re-election to a second four-year term as the bank’s chairman.
“The Fed will be obliged to start hiking rates in March, and depending on political pressure from both sides of the aisle, they may have to hike rates four or more times this year, and possibly more next year,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
After rising 0.8 percent in November, the consumer price index rose 0.5 percent last month. Consumers paid more for food in addition to increased rents, albeit the 0.5 percent rise was lower than in prior months. After climbing 6.1 percent in November and October, gasoline prices dipped 0.5 percent in November.