Key inflation gauge hits 40-year high as gas and food prices soar | Economic news
WASHINGTON (AP) — A closely watched Federal Reserve inflation gauge jumped 6.4% in February from a year ago, with sharply higher prices for food, gasoline and other other necessities that squeeze the finances of Americans.
The figure released Thursday by the Commerce Department was the largest year-over-year increase since January 1982. Excluding food and energy price volatility, so-called core inflation rose 5, 4% in February compared to 12 months earlier.
Strong consumer demand combined with shortages of many goods to fuel the biggest price increases in four decades. Adding to inflationary pressures, Russia’s invasion of Ukraine disrupted global oil markets and pushed up prices for wheat, nickel and other key commodities.
The surge in inflation had an impact on consumers, whose spending in February rose only 0.2%, compared to a much larger gain of 2.7% in January. Adjusted for inflation, spending actually fell 0.4% last month.
The Federal Reserve responded to surging inflation this month by raising its benchmark short-term interest rate by a quarter point from near zero, and is likely to continue to raise it until next year. Because its rate affects many consumer and business loans, Fed rate hikes will make borrowing more expensive and could weaken the economy over time.
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JPMorgan’s Michael Feroli is among economists who now believe the Fed will raise its key rate by an aggressive half a point in May and June. The central bank has not raised its key rate by half a point in two decades, a sign of its concern about the persistent surge in inflation.
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