Inflation rises 7% over the past year, highest since 1982

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Inflation plowed ahead at its fastest 12-month pace in nearly 40 years during December, according to a closely watched gauge the Labor Department released Wednesday.

The consumer price index, a metric that measures costs across dozens of items, increased 7%, according to the department’s Bureau of Labor Statistics. On a monthly basis, CPI rose 0.5%.

Economists surveyed by Dow Jones had been expecting the gauge to increase 7% on an annual basis and 0.4% from November.

The annual move was the fastest increase since June 1982.

Despite the strong gain, stock market futures rose after the news while government bond yields were mostly negative.

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Excluding food and energy prices, so-called core CPI increased 5.5% year over year and 0.6% from the previous month. That compared with estimates of 5.4% and 0.5%. For core inflation, it was the largest annual growth since February 1991.

Shelter costs, which make up nearly one-third of the total rose 0.4% for the month and 4.1% for the year. That was the fastest pace since February 2007.

Used vehicle prices, which have been a major component of the inflation increase during the Covid pandemic due to supply chain constraints that have limited new vehicle production, rose another 3.5% in December, bringing the increase from a year ago to 37.3%.

Federal Reserve officials are watching the inflation data closely and are widely expected to raise interest rates this year in an effort combat increasing prices and as the jobs picture approaches full employment. Though the central bank uses the personal consumption expenditures price index as its primary inflation measure, policymakers take in a wide range of information in making decisions.

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