Inflation in the US is at its highest in 39 years

Annual inflation in the US was recorded as 7 percent in December. Thus, annual inflation reached its highest level since June 1982. Consumer prices increased by 0.6 percent on a monthly basis in December. The expectation for this data was determined as 0.5 percent. The consumer price index excluding food and energy, which is considered a core inflation indicator, increased by 5.5 percent in December compared to the same period of the previous year. The expectation was 5.4 percent. On a monthly basis, the consumer price index excluding food and energy increased by 0.6 percent. Economists had expected a 0.5 percent increase for this data. The forecast was for a 7% increase Economists surveyed by Bloomberg expected annual inflation of 7 percent. Bloomberg Economics predicted that supply shortages stemming from the Omikron variant could put additional upward pressure on US inflation in the first quarter. In addition, it was estimated that the factors pushing prices up in the country would have less impact on prices for the rest of the year. Speaking before the data, Federal Reserve Chairman Jerome Powell said that high inflation is a "serious threat" to the economic recovery in the United States and that the Fed will do whatever is necessary to rein in inflation. Addressing the U.S. Senate Banking Committee, Powell said the Fed will begin raising near-zero interest rates and shrinking its $8.8 trillion balance sheet, not as a policy to cool an overheating economy, but rather as a result of ultra-lax emergency measures introduced during the pandemic. Stating that he thinks he will return to normal supply conditions this year, Powell said, "If we see inflation staying at higher levels for longer than expected, if we have to increase interest rates more over time, we will increase them." "We're really going to move to a closer to normal policy this year, but it's a long way from where we are now to normal," said Powell, noting that they don't expect this process to have a negative impact on the employment rate. The march expectations are getting louder for the interest rate hike Although Powell did not indicate in which month the interest rates will start to increase, he made it clear that they will start shrinking the balance sheet this year. The two regional heads of the Fed supported Powell in their statements yesterday. Cleveland Fed President Loretta Mester, who has the right to vote on interest rate decisions this year, said she would support a rate hike in March if the economy maintains its current outlook. Kansas City Fed President Esther George also said the Fed is in favor of starting to shrink its balance sheet in the early stages of normalization.