With common men already feeling the pinch of rising prices across the world, the US is likely to hit an all-time high. Economists say the American economy has seen this kind of ‘high’ inflation in nearly 40 years.
According to Dow Jones estimates, Wall Street expects the index to show a 0.7% gain for the month. This will translate into a 6.7% increase from a year ago. The consumer price index (CPI) is predicted to rise 0.5% on a monthly basis and 4.9% on an annual basis. As such, this would be the highest year-on-year for CPI since June 1982, when the index went over 7%. However, this time around it would be the highest since June 1991, as per reports.
Economists, as per Wall Street Journal, forecast a sharper increase than October’s 4.6% raise, and the highest rate since 1991. This has been pushed by the new Omicron COVID variant which was detected in southern Africa late last month.
Allen Sinai, chief global economist and strategist, Decision Economics Inc., said these are frighteningly high inflation numbers, the likes of which haven’t been seen for decades. He believes there was high inflation of 7% in November. “Despite the high rate, the main driver of inflation is a good thing – a booming economy. We have tremendous spending by consumers. A lot of people are getting hired. Demand is huge. Monetary policy remains very easy and fiscal stimulus has no precedent in history.”
With the advent of the COVID-19 in 2020, investors have been watchful of inflation. They have recorded some of the highest levels in decades. Tom Graff, head of fixed income at Brown Advisory says it will not be good for stocks. “The most likely reason stocks would correct in the next several months would be that inflation is viewed as so problematic, that the Fed is going to have to get aggressive much sooner.”