WASHINGTON (AP) — An inflation gauge closely monitored by the Federal Reserve jumped 6.4% in February compared with a year ago, with sharply higher prices for food, gasoline and other necessities squeezing Americans’ finances.
The figure reported Thursday by the Commerce Department was the largest year-over-year rise since January 1982. Excluding volatile prices for food and energy, so-called core inflation increased 5.4% in February from 12 months earlier.
Robust consumer demand has combined with shortages of many goods to fuel the sharpest price jumps in four decades. Escalating the inflation pressures, Russia’s invasion of Ukraine has disrupted global oil markets and accelerated prices for wheat, nickel and other key commodities.
The inflation spike took a toll on consumers, whose spending in February rose just 0.2%, down from a much larger 2.7% gain in January. Adjusted for inflation, spending actually fell 0.4% last month.
The Federal Reserve responded this month to the inflation surge by raising its benchmark short-term interest rate by a quarter-point from near zero, and it’s likely to keep raising it well into next year. Because its rate affects many consumer and business loans, the Fed’s rate hikes will make borrowing more expensive and could weaken the economy over time.
Michael Feroli of JPMorgan is among economists who now think the Fed will raise its key rate by an aggressive half-point in both May and June. The central bank hasn’t raised its benchmark rate by a half-point in two decades, a sign of how concerned it has become about the persistent surge in inflation.
