Inflation Hits 6.8%, the Highest Since 1982

November rate could lead to higher borrowing costs sooner

Woman gazing at products on grocery shelf
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The economy’s having an ‘80s flashback for all the wrong reasons: Inflation came in at a  blistering 6.8% rate in November, the highest since 1982.

  • Prices rose 6.8% in the year through November, the highest inflation rate since 1982.
  • Price increases were spread across a wide range of goods and services, with food, gas, and vehicles having some of the bigger gains.
  • It’s unclear whether inflation has now peaked or will accelerate further, economists say. 
  • The rapid price increases should spur the Federal Reserve to speed up its shift from economic stimulus mode to inflation-fighting mode, which means higher borrowing costs are on the horizon.

The 6.8% jump in consumer prices in the 12 months through November is an acceleration from October’s 6.2% and reflects increases across most of the categories tracked by the Bureau of Labor Statistics, the bureau said in a report Friday. It’s still far below the double-digit figures of the bad old “stagflation” era of the 1970s, but it’s not clear whether the current inflationary storm has peaked or the worst is yet to come. 

"Inflation looks like it will run hot until at least the end of 2022,” though the 6.8% is probably the highest we’ll see, said William Adams, senior economist at PNC Financial Services.

One thing seems more certain: The rapid increases will undoubtedly spur the Federal Reserve to speed up its shift from economic stimulus mode to inflation-fighting mode, economists said.That means pulling away from the two main ways it’s supported the economy during the pandemic downturn: reducing its purchases of securities, and hiking the benchmark interest rate that affects credit cards, mortgages, and other bank loans.

Price increases of 0.8% between October and November were slightly less than the 0.9% increase between September and October, but steeper than the 0.6% increase economists were expecting, according to a consensus poll cited by Wells Fargo Securities. Food, gas, shelter, and new and used vehicles were among the biggest contributors. 

Inflation has been getting worse because the pandemic’s disruptions to supply chains and the workforce have made it hard for businesses to keep up with ravenous demand from customers. If there was a bright side to the latest report, it’s that some economists believe November’s figures might represent a peak, with other recent data showing glimmers of relief both for the shortage of workers and logistical bottlenecks that have tied things up, as well as hope for a meaningful decline in those gas prices. Even under the best-case scenario though, it will take a while for the price increases to ease, and in the meantime, consumers are feeling the heat.

“The breadth of price hikes raises the potential for current inflation to become self-reinforcing, particularly as employers' desperation to hire is bidding up wages,” Wells Fargo economists Sarah House and Michael Pugliese wrote in a commentary, forecasting inflation to hit 7% early next year before it starts to subside. 

Rising prices have kept many consumers pessimistic about their own finances and the economy, even as workers have gained a firm upper hand in the job market, University of Michigan economists said in releasing their latest index of consumer sentiment Friday.

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