U.S. consumer prices hit new 40-year high

March 11, 2022 - 17:48

TEHRAN- Consumer prices in the United States spiked to a new high in February to 7.9 percent, the biggest monthly jump since 1982, forcing American families trying to pay for basic essentials such as rent, food, and gasoline to suffer even further.

Lower-income households bear the brunt of high inflation as they spend more of their income on food and gasoline. Economists expect the annual CPI rate to peak above eight percent in March or April.

For the majority of Americans, inflation is running far ahead of the pay rises that many have received in the past year. Now the major difference between the cost of living and wage growth has become the biggest political threat to president Biden and congressional Democrats as the midterm elections loom over the horizon.

This is while inflation is poised to accelerate more as the impact of Washington’s sanctions on Russian oil, natural gas, and coal following Moscow’s military operation in Ukraine drives up the costs of crude oil and other vital commodities.

Economists expect the annual Consumer Price Index (CPI) rate will peak above eight percent in March or April 

Prices for fruit and vegetables increased the most since March 2010, while the rise in the cost of dairy and related products was the largest in nearly 11 years. Consumers have also paid more for household goods, motor vehicle insurance as well as clothing, and personal care. Some studies have found that rising gas prices have caused families to delay larger purchases.

The U.S. Labor Department says the broad rise in prices has led to the largest annual increase in inflation in 40 years with the CPI at almost eight percent in February in comparison with the same month last year.

Before Russia even launched its military operation in Ukraine on February 24, inflation in America was already haunting the economy and at the same time further eroding President Joe Biden's popularity.

Now, analysts say the fallout from the Russian military operation in Ukraine (which critics blame the U.S.-led NATO alliance of triggering) and the anti-Russia sanctions imposed by Washington will only exacerbate the situation and add to the woes of American families.  

The cost of wheat, corn, cooking oils, fertilizer, and metals, including aluminum and nickel, all key Russian and Ukrainian exports, have also skyrocketed since the conflict began.

Investors are mostly scared about oil prices, while other areas of the markets are creeping up because supply chain issues are causing more anxiety. Amid increases in oil prices, queues of container truckers with food supplies have been seen waiting outside big food stores in the capital Washington. Observers have noted that authorities have failed to find a solution to the food supply problem. 

In essence, the United States, with a population of some 330 million, relies on trailers because the majority of shops do not have large storage facilities capable of storing essential food items before their expiry date. Trucks bring the food and store it in the shops which are then stocked on the shelves until consumers buy the products, in particular dairy products and bread. If the price of oil prevents the supply chain (as trucks are effectively used as the storage facility) to deliver the goods, then those vital commodities will no longer be available in the shops.

The sharp rise in energy costs, which have been as much as 20 percent in the month of March alone, is expected to add 0.8 percentage points to the consumer inflation index.

With the rising gas prices, there are calls for the federal government to do more to allay fears among the public and undertake swift measures to protect Americans as the soaring inflation is wiping out months of gains from the ordinary workers wages.

Housing costs, which make up about a third of the CPI, have also sharply risen, with apartment vacancy rates reaching their lowest level since 1984.

Some economic analysts also say consumers' shock at rapidly rising gas prices at the gas pumps will continue to put pressure on the Federal Reserve and policymakers to do something, anything, to slow down the speed at which prices everywhere are moving higher. 

The Federal Reserve is expected to start raising interest rates next Wednesday (the first time since 2018). With inflation nearly four times the U.S. central bank's two percent target, economists are expecting as many as seven rate hikes this year.

Critics say the Fed increasing interest rates during times of rising prices in vital commodities will lead to a decline in economic activities and inflation pressure in the U.S. will only heighten. 

The measures taken by the Fed will hurt working-class people as history suggests they are ineffective for the average American household. 

The consequences of the rising oil prices and other commodities that have been exacerbated by the conflict in Ukraine has led to the question of who should pay the costs of the economic fallout in America? 

According to some analysts, the economic measures the Biden administration is trying to implement will affect the profit of small businesses and increase the wealth of the wealthy. 

With America having multiple economic problems, one intertwined with the other, Washington is also increasing tensions in the Pacific region against China, and with Beijing not backing down against America’s imperialist plots, this could make the economic situation even worse. 

The United States and its allies have imposed wide-scale sanctions on Moscow, with the Biden administration banning imports of Russian oil into the U.S., Russia is the world's second-largest crude oil exporter.

Data shows U.S. gasoline prices are averaging a record $4.318 per gallon compared with $3.469 a month ago. The prices vary from state to state and California has seen around $6 per gallon, with overall expectations that these prices will rise further. 

President Biden has acknowledged the hardships Americans were facing from sky-rocketing prices, but as analysts had expected, he blamed Russian President Vladimir Putin for America’s economic problems. 

In a statement, Biden said, "as I have said from the start, there will be costs at home as we impose crippling sanctions in response to Putin's unprovoked war, but Americans can know this, the costs we are imposing on Putin and his cronies are far more devastating than the costs we are facing.”

Critics argue Biden is using the Russian sanctions as an excuse for the rising inflation and to distract attention from his plummeting popularity with the American President already seeing his approval ratings sink as prices rose throughout 2021.

While the fallout from the Russian Ukraine conflict is expected to worsen inflation in America, the U.S., NATO, and Europe are doing very little to end the fighting, which can ease the financial situation of Americans. 

Ukraine has previously said it had been abandoned by the West and in the latest blow to the country, the EU has refused Kyiv’s appeal for quick accession to the bloc while cracks have appeared over sanctions against Moscow.

The Dutch Prime Minister Mark Rutte, a prominent opponent of EU enlargement, told the Ukrainian government "it will take time, months, maybe years before you get to anything,” and Croatia’s Prime Minister Andrej Plenkovic said, "nobody entered the European Union overnight.” Divisions have also emerged over the possibility of dealing with more sanctions targeting Russia, advocated by countries like France and Italy but opposed by Germany, the Netherlands, and others.

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