WASHINGTON (AP) — At first, it didn’t even register as a threat. Then it seemed like a temporary annoyance.
Now, inflation is flashing red for the Federal Reserve's policymakers — and delivering sticker shock to Americans at the used car lot, the supermarket, the gas station, the rental office.
On Wednesday, the Labor Department reported that consumer prices jumped 7% in December compared with 12 months earlier — the hottest year-over-year inflation since June 1982. Excluding volatile energy and food prices, what is called “core” inflation rose 5.5% over the past year, the fastest such pace since 1991.
Bacon prices are up nearly 19% from a year ago, men's coats and suits nearly 11%, living and dining room furniture more than 17%. Renting a car will cost you 36% more, on average, than it did in December 2020.
“Prices are increasing broadly throughout the economy, and the Federal Reserve has been caught off-guard by the extent of inflation,'' said Gus Faucher, chief economist at PNC Financial.
It wasn’t supposed to be this way — not with the coronavirus pandemic keeping people hunkered down at home and triggering a devastating recession beginning in March 2020. Barely more than a year ago, the Fed had forecast that consumer prices would end 2021 only about 1.8% higher than they were a year earlier, below even its annual 2% inflation target.
Yet after having been an economic afterthought for decades, high inflation reasserted itself last year with astonishing speed. In February 2021, the Labor Department’s consumer price Index was running just 1.7% ahead of a year earlier. From there, the year-over-year price increases accelerated steadily — 2.6% in March, 4.2% in April, 4.9% in May, 5.3% in June. By October, the figure was 6.2%, by November 6.8%.
At first, Fed Chair...
