TEHRAN (Iran News) – New data shows the rate of inflation rose 0.8% in November in the United States following last month’s record rise. The U.S. Bureau of Labor Statistics has recorded an increase of 6.8% over the last year which means inflation has hit the highest growth since 1982. Many sectors have been hit by a rise in prices including gas, food and housing with the average American feeling the pinch.
The school of thought that corporate giants are the root cause of the problem as they set higher prices without fear of any financial retribution because nobody else can compete with these companies in America has not gone away.
The consumer price index for November which has risen 6.8 percent compared with the same month last year overtakes the 6.2 percent increase in October, which was also another record for being the fastest gain in 31 years. In some regions, the November figure was recorded even higher, for example, Dallas-Fort Worth-Arlington saw an even larger increase of 7.5 percent.
This is the sixth consecutive month Americans are facing an increase in prices. The country has now also experienced six months of over 5 percent inflation. The almost four-decade high is adding pressure on President Joe Biden’s political agenda as his administration seeks to pass a $1.9tn social spending bill.
Before the latest figures came out, Biden made a rare and unusual move by trying to cushion the blow and diffuse the impact by issuing a rare extensively long statement, with claims that the data will not reflect recent declines in the price of energy and used cars.
However, the Bureau of Labor Statistics begs to differ with the American President, as it records prices of used and new cars, household furnishings, apparel and airline fares all notably rising.
Western media outlets have reported shoppers, in particular those living on low and middle incomes as the ones who are suffering from the hike in prices. A single mother has been quoted as saying sometimes she buys one meal per day and shares it with her 27-year-old son. “We don’t have any choice,” she says, “I can’t afford to cook. I take a little bit then I give him more because a mother is always going to do that for her child.” Price rises are eating into her and other American’s shopping bills, “Gas went up when gas goes up everything goes up”
In November, gasoline prices jumped 6.1 percent. That is the highest increase over 12 months since 1980. Fuel costs about 60% more than it did a year ago. As for food prices, products at the grocery stores witnessed increases across the board for the third month in a row. Items such as poultry, fish, meat, and eggs saw a 0.9% increase as cereals and bakery products saw price hikes of 0.8%. The price index that does not include food and energy rose 0.5% in November after a 0.6% increase in October. The food price rise is the biggest increase since the 2008 financial crash.
Just recently, Federal Reserve Chair Jerome Powell said the U.S. central bank needs to be ready to respond to the possibility that inflation may not lesson in the second half of next year as some economists are currently expecting. New York Fed President John Williams told the New York Times, the new coronavirus variant Omicron might change the economic outlook or the Fed’s policy response, warning that it could both slow economic activity and exacerbate inflationary pressures. That frightening combination could add to the challenges Fed policymakers face as they adjust their response to some recent good news of an economy growing slowly and bad news of a potentially explosive new COVID-19 surge, and inflation that is lingering longer and staying higher than many had expected.
It was after all, as observers have noted, former President Donald Trump’s poor handling of the coronavirus pandemic that led to an economic crisis in America and ultimately cost Trump his job and Americans their lives.
In another bitter twist, the soaring inflation is overtaking all efforts that have been made to increase worker wages to their highest level in decades. In November, Inflation-adjusted hourly pay was 1.9% lower in comparison to a year ago. In essence, workers’ paychecks are not buying as much as they used to do so before. Experts say the astonishing surge in U.S. prices this year could peak in the next few months as supply-chain bottlenecks are gradually undone, but high inflation is likely to last well into 2022.
Adding to the bad news, the cost of rent also rose sharply in November for the third consecutive month and is adding to White House concerns that this could further push inflation upwards. House rents had been relatively stable during the pandemic, but they have seen an uptick of three percent over the past year and are likely to keep climbing further. For most households, their shelter is the biggest expense. Prices also rose sharply last month for new and used cars and trucks, home furnishings, clothing and airplane tickets.
The biggest question that remains in the air is whether and how much inflation will slow. The Fed predicts, as you would expect, the rate of price increases to fall below three percent towards the end of the next year 2022, however many economists believe it will prove very difficult for inflation to go down so quickly.
The topic has become a thorny political issue and a potentially damaging one for the White House, hurting Biden’s approval ratings as well as becoming the focus of electoral prospects for the Democratic party during next year’s midterm elections. Inflation directly affects ordinary voters as some economists have blamed the President’s huge spending programs, which the White House claims are designed to offer support amid the Covid pandemic but some economists say Biden’s spending plans are the root cause of the rising inflation rates.
Christopher Campbell, a chief strategist and a former treasury official during President Donald Trump’s era argues that further spending could make inflation worse. He says “one of the major reasons we have inflation is because the government spent so much money”
Senior economist Sal Guatieri says “U.S. inflation was even hotter than expected in November and is now running the fastest in nearly four decades, with little near-term relief in sight. The Fed has little choice but to accelerate tapering and prepare for the possibility of much earlier rate hikes than it was planning just a few months ago.”
Senate minority leader, Mitch McConnell, quickly took to social media to criticize the Democrats for their response to the crisis saying “6.8% inflation is the worst in almost 40 years. It is unthinkable that Senate Democrats would try to respond to this inflation report by ramming through another massive socialist spending package in a matter of days.”
Americans initially expected the problem to fade away as they were told pandemic-related economic disruptions are being smoothed out. But recently both the Treasury Secretary Janet Yellen and the Federal Reserve Chair Jerome Powell have said they would no longer refer to inflation as “transitory.” There is now mounting speculation that the Federal Reserve will reduce or even end the bond-buying support program it provides every month as quickly as next week, paving the way for a possible rise in interest rates next year.
Can Biden fix the problem? Republicans and even some Democrats have argued that additional spending will add further fuel to the fire. Should Washington rein in on corporate giants to lower prices? There is an argument that this will not happen as they supposedly benefit from their tax revenues, but big companies have a track record of putting that money in tax havens. Why the U.S. administration is not even looking into this issue or addressing it remains a mystery.