Consumer prices soared in 2021 in the United States, where inflation has been at its highest for almost 40 years, a major concern for Joe Biden, but also for the central bank, to which all eyes are now turning.
Inflation hit 7% in 2021, a year-over-year record since the period ending June 1982, according to the Consumer Price Index released by the Labor Department on Wednesday.
Joe Biden, for whom this soaring cost of living is a major political problem, stressed the “progress” made by his government, but admitted that “there was still work, with prices still too high, which squeeze the market. household budget ”.
The price of gasoline in particular climbed by almost 50% in 2021, and that of used cars, by more than a third. Food prices have also increased, but to a lesser extent.
However, in December alone, the increase was less strong than in November (0.5% against 0.8%). The increase in energy prices then slowed for the first time since April.
The Republican opposition, which accuses the President, Democrat, of an inflationary policy involving too much spending, has castigated what it now calls “Bidenflation”. “Joe Biden doesn’t seem to care that Americans can’t afford anything, from gas to groceries,” he said. tweeted the republican party.
Demand, however, remains very strong as the bank accounts of a large swath of the population have been bailed out by government aid, while homeowners and equity portfolio holders have seen the value of their holdings surge. .
“From patience to panic”
“Persistent bottlenecks in the supply chain, in a context of strong demand, will keep the inflation rate high at least until the first quarter,” predicts Kathy Bostjancic, chief economist at Oxford Economics. And the Omicron variant could still feed it, forcing employees to quarantine themselves, which would in fact slow down production and delivery.
All eyes are now on the US central bank (Fed), which could raise its key rates earlier and more than expected in an attempt to curb this inflation, which until recently it considered only temporary. Its long-term objective is annual inflation of 2%, which would give room for maneuver on key rates in the event of an economic hardship.
The Fed “went from patience to panic in the face of inflation in record time,” notes Diane Swonk, economist at Grant Thornton.
The powerful Federal Reserve will therefore engage in a delicate balancing act. Raising rates is indeed aimed at stopping this overheating of the economy by slowing consumption, but this approach risks slowing down the recovery of the job market as well. However, in December, while unemployment fell to 3.9%, job creation lagged behind, and inequalities were very high.
Fed Chairman Jerome Powell, who was heard by senators on Tuesday, promised to act “accordingly” if this record inflation persists in the second half of this year.
14.8% inflation in 1980
“Inflation can be managed, and central banks know how,” International Monetary Fund director Kristalina Georgieva said Wednesday morning.
These figures should put a little more lead in the wing to the social and environmental investment plan of Joe Biden, “Build Back Better”, already paralyzed because accused of being inflationary.
However, this 7% inflation remains far from the 14.8% rate the country experienced in 1980.
Recently, it was rather low inflation that worried economists. In 2020, it was, for the whole year, at the lowest in five years, at 1.4%.
But 2021 was marked by tremendous pressure on the global supply chain, with shortages of some components driving prices up. The lack of manpower in the United States also slowed down production and delivery. To attract applicants, employers offered higher wages and working conditions. In 2021, the average hourly wage thus increased by 4.7%. This increase only partly compensates for the surge in prices, in addition to fueling inflation through its repercussion on them.