President Joe Biden is breaking records in the worst of ways. The Consumer Price Index (CPI) increased by 7.5 percent over the last year. The percentage increase marks the largest annual increase since February of 1982.
In the last month inflation surged over 0.6 percent, and 7.5 percent over the last twelve months, ending in January. That marks the largest increase since 1982 when inflation hit 7.62 percent.
The supply chain issue has exacerbated the inflation, which has increased at least 0.5 percent seven times in the last ten months alone. The Core CPI jumped 6.0 percent higher annually; again the highest jump since 1982, of the period ending in August.
Fed Chair Jerome Powell recently indicated the central bank may start to reverse its accommodative monetary policy and hike interest rates beginning in March in order to ease the inflation spikes.
While pressure is piling on the Fed to slow inflationary pressures strangling many Americans at the gas pump, grocery store, and across goods and services, the stock market is expected to react poorly in the event of an interest rate increase.
After Powell’s announcement…major stock indices the Dow, S&P 500, and Nasdaq Composite dipped 1 percent, 0.9 percent, and 0.7 percent, respectively. The tradeoff for combating inflation is often a drag in economic production, although while restoring purchasing power to consumers.
Despite mounting inflation, the Fed has said easing of inflation would be coming and market imbalances would be rectified. “However, that prediction proved wrong” writes National Review.
Suggesting the Fed needs to intervene soon, Powell said, “Inflation risks are still to the upside in the views of most FOMC participants, and certainly in my view as well. There’s a risk that the high inflation we are seeing will be prolonged. There’s a risk that it will move even higher. So, we don’t think that’s the base case, but, you asked what the risks are, and we have to be in a position with our monetary policy to address all of the plausible outcomes.”