BIDINFLATION: Highest consumer costs in 40 years

The consumer price index rose 0.5 percent in December, following hot on the heels of a 0.8 percent increase in November, the Labor Department revealed on Wednesday.

For the 12 month ending in December, the consumer price index rose 7 percent, marking the largest 12-month increase since the period ending in June 1982. This jump followed a 6.8 percent rise in November.

For items minus the more volatile food and energy categories, prices rose 5.5 percent in the 12-month period ending in December, the largest jump since the period ending in February 1991. The Labor Department said this increase came from a 4.1 percent increase in shelter, and a 37.3 percent increase in used vehicles.

"However, the increase is broad-based, with virtually all component indexes showing increases over the past 12 months," the Labor Department wrote.

Energy prices rose 29.3 percent over the last year despite falling by .4 percent in December. The individual subcategories of gasoline and fuel oil rose 48.9 percent and 49.6 percent respectively over the last year, though fell by .6 and .5 percent in December. Fuel oil has been Tre ending downwards in prices since October, when it skyrocketed by 12.3 percent, up from 3.9 percent in September.

Food prices rose 6.3 percent over the last year, rising .5 percent in December alone.

Economists say that the annual CPI rate most likely peaked in December, or would likely do so by March at the latest. "There are signs that supply bottlenecks are starting to ease, with an Institute for Supply Management survey last week showing manufacturers reporting improved supplier deliveries in December," according to Reuters, though rising COVID-19 cases could slow progress on supply chains.

Inflation is now trending well above the Federal Reserve’s 2 percent target, and according to Reuters, "is also being lifted by budding wage pressures."

New reports also suggest that the labor market is nearing maximum employment, with the unemployment rate dropping to a 22-month low of 3.9 percent in December.

Fed Chair Jerome Powell said on Tuesday during his nomination hearing before the Senate Banking Committee that the US central bank is ready to do what’s necessary to keep the high inflation from becoming "entrenched."

"The laundry list of reasons for the Fed to begin removing monetary policy accommodation is growing," Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania, told Reuters. "Inflation would need to decelerate rapidly to take some of the pressure off the Fed and this is unlikely to occur."