40 YEAR HIGH: Inflation surges in December to highest rate since 1982
-induced disruptions in the economy, while Republicans have pinned it on the president's massive spending agenda.
The eye-popping reading – which marked the seventh consecutive month the gauge has been above 5% – will likely amp up pressure on the Federal Reserve to begin hiking interest rates as soon as March in order to combat the recent price surge. Hiking interest rates tends to create higher rates on consumers and business loans, which slows the economy by forcing them to cut back on spending.
"The Federal Reserve will most likely raise interest rates earlier than anticipated to control inflation," said Dawit Kebede, senior economist at the Credit Union National Association. "This is in addition to ending its support for the economy in the form of large asset purchases. This will raise the cost of borrowing for consumers and will reduce excess demand for goods."
Jerome H. Powell, chair of the Board of Governors of the Federal Reserve, is sworn in during a confirmation hearing before the Senate Banking, Housing and Urban Affairs Committee on Jan. 11, 2022, in Washington. Chairman Jerome Powell has already signaled the U.S. central bank plans to speed up its withdrawal of support for the U.S. economy in order to combat inflation, which has been higher and longer lasting than policymakers initially expected.
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