For the 12 months ending in January, inflation amounted to 7.5% – the fastest year-over-year pace since 1982 – the Labor Department said Thursday. Even if you toss out volatile food and energy prices, so-called core inflation jumped 6% over the past year. That was also the sharpest such jump in four decades.
Inflation has become an ongoing financial strain for millions of Americans. Consumers felt the price squeeze in everyday routines. Over the past year, prices rose 41% for used cars and trucks, 40% for gasoline, 18% for bacon, 14% for bedroom furniture, 11% for women’s dresses.
The Federal Reserve didn’t anticipate an inflation wave this severe or this persistent. In December 2020, the Fed’s policymakers had forecast that consumer inflation would stay below their 2% annual target and end 2021 at around 1.8%.
Fed Chair Jerome Powell and others saw it as a “transitory” problem. Now, many economists expect consumer inflation to remain elevated well into the year, with demand outstripping supplies in numerous areas of the economy.