U.S. consumer prices surged in February, leading to the largest annual increase in 40 years, and inflation is poised to rise further in the coming months as Russia’s invasion of Ukraine drives up the costs of crude oil and other commodities.
According to a report from the Labor Department on Thursday, March 10th, the consumer price index increased 0.8 percent in February, after gaining 0.6 percent in January.
The Washington Free Beacon reports:
In the 12 months through February, the CPI shot up 7.9 percent, the biggest year-on-year increase since January 1982. That followed a 7.5 percent jump in January and was the fifth straight month of annual CPI readings north of 6 percent.
Economists polled by Reuters had forecast the CPI rising 0.8 percent and vaulting 7.9 percent on a year-on-year basis.
Inflation has way overshot the Federal Reserve’s 2.0 percent target. The U.S. central bank is expected to start raising interest rates next Wednesday to stamp out inflation, with economists expecting as many as seven rate hikes this year.
Last month’s CPI data does not fully capture the spike in oil prices following Russia’s invasion of Ukraine on Feb. 24. Prices shot up more than 30 percent, with global benchmark Brent hitting a 2008 high at $139 a barrel, before retreating on Wednesday after reports that the United Arab Emirates would call on fellow OPEC members to boost production.
The U.S. and its allies have imposed severe sanctions on Russia, with Joe Biden officially banning imports of Russian oil into the U.S. on Tuesday, March 8th. Russia is the world’s second-largest crude oil exporter.
Gas prices in the United States are averaging a record $4.318 per gallon compared with $3.469 a month ago, according to data from AAA.
David Kelly, chief global strategist at JPMorgan Funds in New York, reports that if gasoline averaged close to $4.20 for the year, that would add over $1,000 to the expenses of the average household.
The Russian invasion of Ukraine, which has caused the prices of wheat and other commodities to increase dramatically, is also seen keeping inflation uncomfortably high into the second quarter.
“Our estimates suggest gasoline and natural gas prices are on track to add over 1 full percentage point or so to overall year-on-year prints in each month over the next ten months,” said Kevin Cummins, the chief U.S. economist at NatWest Markets in Stamford, Connecticut.
Lower income households will be bearing the brunt of high inflation as they spend more of their income on food and gasoline.
Source: The Washington Free Beacon