Inflation Reaches New High as Consumer Prices Jump 7.9%, Highest in Four Decades

The Department of Labor said that the consumer price index rose 7.9 percent compared with a year ago. Prices were up 0.8 compared with the prior month.

This is the ninth straight month of inflation above 5 percent. Prices rose at an annual rate of 7.5 percent in January, jumping 0.6 percent from December.

Economists had forecast CPI to rise by 0.7 percent for the month and 7.8 percent compared with a year ago.

The index for all items less food and energy, often called core CPI, rose 0.5 percent in February. Compared with a year ago, core prices were up 6.4 percent, the fastest pace for this measure since August 1982.

These figures do not take into account the recent surge in oil and gasoline prices. Those are likely to push inflation even higher in March.

Although many economists and anti-Trump journalists claimed President Donald Trump’s tariffs would raise prices, consumer prices remained low throughout his administration. Trump’s tariffs turned out not to be taxes on consumers. Instead, they were absorbed by Chinese producers and exporters and the profit margins of most large U.S. companies.

Inflation only began to accelerate last March after years of coming in below the Fed’s two percent target. The Fed had decided to keep interest rates low although the economy was recovering at a faster than expected rate.

What’s more, the Biden administration pushed through billions of dollars of deficit spending in the American Rescue Plan. These combined to fuel demand for goods and services faster than supplies could expand, pushing up prices.

Federal Reserve chief Jerome Powell, following the advice of many of the economists on the central bank’s staff, initially claimed that inflation was due to transitory factors. Fed officials forecast that inflation would fall in the latter half of 2021, predicting that supply chains would swiftly unsnarl and a rebalancing of consumer demand from goods to services would relieve pricing pressure.

The Biden administration, under the tutelage of former Fed chair and now Treasury Secretary Janet Yellen, largely followed suit and continued to press for even more spending.

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