Inflation Continues Running Hot: 7% For December 2021

The article strikes an optimistic tone, but inflation was never supposed to hit this level in the first place:

The Consumer Price Index surged 7% year-over-year in December, matching the average estimate.

The pace marks the strongest inflation since 1982 and a slight pickup from November’s 6.8% gain.

Economists expect inflation to cool through early 2022 as supply chains heal and demand eases.

Inflation in December was the strongest in almost four decades. It just might be the peak of pandemic-era price growth.

The Consumer Price Index — a popular measure of US inflation — gained 7% year-over-year last month, the Bureau of Labor Statistics announced Wednesday. That compares to a median forecast of 7% growth from economists surveyed by Bloomberg. The pace reflects the strongest inflation since 1982 and marks a slight acceleration from the 6.8% year-over-year leap seen in November.

The gauge also rose 0.5% on a month-over-month basis, according to the report. That beat the median estimate of a 0.4% jump and showed a slowdown from the prior month’s 0.8% increase. The weaker one-month print hints overall inflation is fading as the gap between supply and demand closes.

Core CPI, which strips out volatile food and energy prices, rose 0.6% through last month. That came in above the median 0.5% projection and showed a small pickup from November’s 0.5% gain.

The increase was mostly fueled by used car and truck prices, which leaped by 3.5% in December alone. That’s up from 2.5% growth in the previous two months and the biggest jump for the category since June. Prices for apparel and non-energy commodities followed with 1.7% and 1.2% increases, respectively.

Energy prices fell 0.4% through the month, shifting from the sizable month-over-month upticks seen throughout the summer and fall. The category powered much of the recent inflation surge, and a continued pullback could put a damper on overall price growth.

Again, it’s a very spin-heavy and optimistic article.

I’ll believe it’s true when I see it.

The report also comes as the Federal Reserve shifts its focus to fighting the inflation surge. The central bank announced in December it would double the pace at which it shrinks its emergency asset purchases, teeing the program up to end in March. The faster pullback sets the stage for multiple interest rate hikes in 2022, and Fed Chair Jerome Powell said Tuesday he’s willing to accelerate the rate-hike timeline if inflation doesn’t fade as anticipated.

Seems pretty panicky to me, no?

“If we have to raise interest rates more over time, then we will,” Powell said. “To get a long expansion, we’re going to need price stability. In a way, high inflation is a severe threat to the achievement of maximum employment and achieving the long expansion that can give us that.”

But they can’t raise rates too much, because doing so will absolutely tank the fragile economy.

Shadow Government Stats says the real inflation rate is around 15%:

The calculate the “real” inflation rate simply by using the formula the BLS used to calculate inflation back in 1980. The formula has been watered down over the years.

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