London Daily

Focus on the big picture.
Monday, Sep 01, 2025

U.S. consumer prices post biggest rise in nearly 40 years; inflation close to peaking

U.S. consumer prices post biggest rise in nearly 40 years; inflation close to peaking

U.S. consumer prices increased solidly in December as rental accommodation and used cars maintained their strong gains, culminating in the largest annual rise in inflation in nearly four decades, which bolstered expectations that the Federal Reserve will start raising interest rates as early as March.

The report from the Labor Department on Wednesday followed on the heels of data last Friday showing that the labor market was at or near maximum employment.
Fed Chair Jerome Powell on Tuesday said the U.S. central bank stood ready to do what was necessary to keep high inflation from becoming "entrenched," in testimony during his nomination hearing before the Senate Banking Committee for a second four-year term as head of the bank.

The high cost of living, the result of snarled supply chains because of the COVID-19 pandemic, is a political nightmare for President Joe Biden, whose approval rating has taken a hit.

"The Fed is going to be forced to begin raising rates in March and depending on the political pressure on them – from both sides of the aisle – they are going to have to raise rates four or more times in this year and potentially more than that next year," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

The consumer price index rose 0.5% last month after advancing 0.8% in November. In addition to higher rents, consumers also paid more for food, though the 0.5% increase in food prices was less than in the prior three months. There were big gains in the prices of fruits and vegetables, but beef prices fell 2.0% after recent sharp gains.

Consumers also got a respite from gasoline prices, which fell 0.5% after rising 6.1% in both November and October.

In the 12 months through December, the CPI surged 7.0%. That was the biggest year-on-year increase since June 1982 and followed a 6.8% rise in November.

Last month's inflation readings were in line with expectations. Rising inflation is also eroding wage gains. Inflation-adjusted average weekly earnings fell 2.3% on a year-on-year basis in December.

President Biden said virtually every nation was afflicted with inflation as the global economy recovers from the pandemic.

"This report underscores that we still have more work to do, with price increases still too high and squeezing family budgets," Biden said in a statement.

Inflation is well above the Fed's flexible 2% target. It is also being lifted by budding wage pressures as the labor market tightens. The unemployment rate fell to a 22-month low of 3.9% in December. Markets have priced in an about 80% chance of a rate hike in March, according to CME's FedWatch tool.

Economists say the broad nature of inflation appears to have caught Fed officials off guard. There are concerns that inflation expectations could become entrenched and compel the Fed to aggressively tighten monetary policy, potentially causing a recession.

"This is the first time the Fed has chased instead of trying to preempt a nonexistent inflation since the 1980s," said Diane Swonk, chief economist at Grant Thornton in Chicago. "Brace yourselves."

Stocks on Wall Street were trading higher amid relief that the increase in prices was as expected. The dollar fell against a basket of currencies. U.S. Treasury prices rose.


BOTTLENECKS EASING


Economists believe the year-on-year CPI rate probably peaked in December or will likely do so by March. There are signs that supply bottlenecks are starting to ease, with an Institute for Supply Management survey last week showing manufacturers reporting improved supplier deliveries in December.

But soaring COVID-19 cases, driven by the Omicron variant, could slow progress towards normalization of supply chains.

Excluding the volatile food and energy components, the CPI increased 0.6% last month after rising 0.5% in November.

The so-called core CPI was boosted by rents, with owners' equivalent rent of primary residence, which is what a homeowner would receive from renting a home, rising a solid 0.4% for a third straight month.

Prices for used cars and trucks accelerated 3.5% after increasing 2.5% in each of the prior two months. The surge likely reflects Hurricane Ida in late August and early September, which destroyed thousands of motor vehicles among other property.

New motor vehicle prices rose 1.0%, marking the ninth consecutive month of gains. A global semiconductor shortage has undercut motor vehicle production.

Prices for furniture, bedding and housekeeping supplies increased. Apparel prices jumped 1.7%, the largest increase since January 2021. The cost of healthcare rose 0.3%.

There were also increases in the prices for airline tickets, personal care products and tobacco. But the cost of motor vehicle insurance fell again as did recreation. Communication prices were unchanged.

In the 12 months through December, the so-called core CPI accelerated 5.5%. That was the largest year-on-year gain since February 1991 and followed a 4.9% advance in November. The year-on-year core CPI rate is seen peaking in February.

Still, inflation is likely to remain above target this year.

"Inflation will slow in 2022 as supply chains reopen and prices for some items, like vehicles and energy, decline as supply catches up to demand," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.

"But inflation for many other goods and services will be higher in 2022 than before the pandemic, due to higher labor costs and input prices. Housing will also contribute to high inflation in 2022."

Comments

Oh ya 4 year ago
Well thank you slow joe and the ho

Newsletter

Related Articles

0:00
0:00
Close
Chinese and Indian Leaders Pursue Amity Amid Global Shifts
European Union Plans for Ukraine Deployment
ECB Warns Against Inflation Complacency
Concerns Over North Cyprus Casino Development
Shipping Companies Look Beyond Chinese Finance
Rural Exodus Fueling European Wildfires
China Hosts Major Security Meeting
Chinese Police Successfully Recover Family's Savings from Livestream Purchases
Germany Marks a Decade Since Migrant Wave with Divisions, Success Stories, and Political Shifts
Liverpool Defeat Arsenal 1–0 with Szoboszlai Free-Kick to Stay Top of Premier League
Prince Harry and King Charles to Meet in First Reunion After 20 Months
Chinese Stock Market Rally Fueled by Domestic Investors
Israeli Airstrike in Yemen Kills Houthi Prime Minister
Ukrainian Nationalist Politician Andriy Parubiy Assassinated in Lviv
Corporate America Cuts Middle Management as Bosses Take On Triple the Workload
Parents Sue OpenAI After Teen’s Death, Alleging ChatGPT Encouraged Suicide
Amazon Faces Lawsuit Over 'Buy' Label on Digital Streaming Content
Federal Reserve Independence Questioned Amid Trump’s Push to Reshape Central Bank
British Politics Faces Tumultuous Autumn After Summer of Rebellions and Rising Farage Momentum
US Appeals Court Rules Against Most Trump-Era Tariffs
UK Sought Broad Access to Apple Users’ Data, Court Filing Reveals
UK Bank Shares Dive Over Potential Tax on Sector
Germany’s Auto Industry Sheds 51,500 Jobs in First Half of 2025 Amid Deepening Crisis
Bruce Willis Relocated Due to Advanced Dementia
French and Korean Nuclear Majors Clash As EU Launches Foreign Subsidy Probe
EU Stands Firm on Digital Rules as Trump Warns of Retaliation
Getting Ready for the 3rd Time in Its History, Germany Approves Voluntary Military Service for Teenagers
Argentine President Javier Milei Evacuated After Stones Thrown During Campaign Event
Denmark Confronts U.S. Diplomat Over Covert Trump-Linked Influence in Greenland
Starmer Should Back Away from ECHR, Says Jack Straw
Trump Demands RICO Charges Against George Soros and Son for Funding Violent Protests
Taylor Swift Announces Engagement to NFL Star Travis Kelce
France May Need IMF Bailout, Warns Finance Minister
Chinese AI Chipmaker Cambricon Posts Record Profit as Beijing Pushes Pivot from Nvidia
After the Shock of Defeat, Iranians Yearn for Change
Ukraine Finally Allows Young Men Aged Eighteen to Twenty-Two to Leave the Country
The Porn Remains, Privacy Disappears: How Britain Broke the Internet in Ten Days
YouTube Altered Content by Artificial Intelligence – Without Permission
Welcome to The Definition of Insanity: Germany Edition
Just a reminder, this is Michael Jackson's daughter, Paris.
Spotify’s Strange Move: The Feature Nobody Asked For – Returns
Manhunt in Australia: Armed Anti-Government Suspect Kills Police Officers Sent to Arrest Him
China Launches World’s Most Powerful Neutrino Detector
How Beijing-Linked Networks Shape Elections in New York City
Ukrainian Refugee Iryna Zarutska Fled War To US, Stabbed To Death
Elon Musk Sues Apple and OpenAI Over Alleged App Store Monopoly
2 Australian Police Shot Dead In Encounter In Rural Victoria State
Vietnam Evacuates Hundreds of Thousands as Typhoon Kajiki Strikes; China’s Sanya Shuts Down
UK Government Delays Decision on China’s Proposed London Embassy Amid Concerns Over Redacted Plans
A 150-Year Tradition to Be Abolished? Uproar Over the Popular Central Park Attraction
×