Consumer prices increased 6.8% for the year ending November, according to a report released on Wednesday by the Bureau of Labor Statistics, the fastest pace of inflation in 39 years.
The much-anticipated numbers from the consumer price index came in above expectations and are likely to add to the damage to economic confidence as well as President Joe Biden's approval ratings.
The high inflation numbers reported Friday were largely driven by soaring energy prices, which were up more than 30% year-over-year, although all areas of the economy are seeing higher prices.
“Inflation is outpacing increases in household income and weighing heavily on consumer confidence, which is at a decade low. It is only a matter of time before it impacts consumer spending in a material way," said Greg McBride, chief financial analyst at Bankrate.
POWELL SAYS FEDERAL RESERVE COULD MOVE FASTER TOWARD RATE HIKES AMID HIGH INFLATION
For months, the Federal Reserve maintained that the higher inflation would be temporary but now appears to see the price increases as too much to stomach. Fed Chairman Jerome Powell recently testified before Congress that he thinks it is time to retire the word “transitory” to describe inflation.
Powell also said that, in light of the higher prices, the central bank might end up deciding to wind down its bond-purchasing program sooner, which would indicate interest rates might be hiked sooner than anticipated.
“At this point, the economy is very strong, and inflationary pressures are high,” Powell said. “And it is, therefore, appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at our November meeting, perhaps a few months sooner.”
The new inflation numbers came on the tail of a worse-than-expected November jobs report last week. The economy added just 210,000 new jobs in November, far fewer than the half-million expected. The combination of high inflation and weaker-than-anticipated job creation has some economists worried about the country’s long-term recovery from the COVID-19 pandemic.
Sen. Pat Toomey, the top Republican on the Banking Committee, lashed out against the Biden administration over its federal spending after the new inflation numbers were released on Friday morning.
"Today’s jaw-dropping inflation report should alarm every single American, but especially policymakers," the Pennsylvanian said. "Hardworking American families are suffering as a direct result of the Biden administration’s reckless borrowing and spending and anti-energy policies. If the message wasn’t clear enough before, it’s crystal clear now."
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Another factor causing uncertainty in the economy is the omicron variant of the virus, which was recently discovered and branded by the World Health Organization as a “variant of concern.” There are fears that the new strain might be more transmissible, although inquiries into the variant are still ongoing.