According to the most recent official figures, US inflation soared to a four-decade-high last month – even before oil price spikes that threatens to worsen the cost of living.
Inflation measured by the consumer price index rose to 7.9% in February from 7.5% at January’s start. This is the highest rate of inflation since January 1982.
The main reason for the rise in fuel prices is rising energy costs. They are up 38% and natural gas up 23.8% respectively.
They could rise further after US-UK plans cut Russian oil imports, which pushed Brent crude’s price on global markets higher.
This is a problem for US President Joe Biden, who faces midterm elections later in the year and has acknowledged that motorists will experience further increases at their pumps, and blamed Russia.
Biden stated this week that he would do everything he could to “minimize Putin’s price rise here at home”, and America has been trying hard to convince oil-exporting nations to increase their production.
Groceries prices are also on the rise, with prices rising 8.6% in the past 12 months. This is the highest annual rate of inflation since April 1981.
Another sector that is under threat from the conflict in Ukraine is this one. This has led to sharp rises in many commodities, including wheat and cooking oil.
The Federal Reserve, America’s central bank, is expected to increase interest rates next week as it responds the the inflation surge.
It is running ahead of the pay growth for most workers. This creates a serious threat to Mr Biden’s and Democrats’ ability to control costs of living ahead of the November midterm elections.
These figures show that prices have risen even before wartime, thanks to buoyant consumer spending as well as pay rises and shortages.
However, the consequences of Ukraine’s invasion have thrown off the notion that inflation would ease in spring.
Eric Winograd is a senior economist at AllianceBernstein’s asset management company. He said that the numbers were eye-watering, and there are more to come.
“The peak inflation will occur later than expected and it will be higher than originally thought.”
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