The inflation in US consumer prices surged higher again in October, the Bureau of Labor Statistics reported Wednesday. In the last year, the prices have climbed up to 6.2% which is the highest increase since November 1990 i.e. in the last 31 years.
Price hikes due to pandemic
This inflation is the hallmark of the global pandemic which is a mix of increasing demand, raw material shortages, and choke points along the global supply chains. Also, the sudden jump in energy costs is further worsening the condition.
On other hand, the Biden administration and the Federal Reserve have been resolute that these price hikes are temporary. The Federal Reserve is starting to hit the brakes of its pandemic-era stimulus, starting by reducing the monthly pace of asset purchases. That could take some of the heat out of the economy. Keeping the prices stable is one of the main tasks of the Central Bank. If the food and energy are excluded then the prices climbed up to 0.6% in last month. This overshadowed September’s hike which was about 0.4%. This hike comprised of many things like vehicles, energy, shelter, appliances, etc.
Contributors in the price hike
The fuel oil prices increased by 12.3% for this month, the energy prices rose about 4.8% in October and are up to 30% for a yearly period. The used vehicle prices rose by 2.5% monthly and about 26.4% yearly. New vehicle prices were up about 1.4% monthly and 9.8% yearly. The food prices also showed a considerable bounce by 0.9% and 5.3% on a monthly and yearly basis respectively. Within the food category: the meat, poultry, fish, and eggs price rose by 1.7% for the month and 11.9% year.
Financial shocks
Price hikes like this are affecting the financial budgets of households across the country. The inflation increased quickly in October and Americans faced a sharp high in consumer prices as they were heading into the holiday season. Americans are bracing for higher prices during their holiday shopping.
Federal Reserve’s beliefs
The Federal Reserve believes that the current inflation is temporary and is “expected to be transitory”. The wages are rising strongly because the companies are searching for workers which makes this situation doubtful for economists, for how long it will prevail. The Federal Reserve started reducing the amount it injected into the economy this month. This money was injected through the monthly bond purchases.
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