Inflation Spiked 7.5% Compared to Last January: a 40-Year High

By Yehudit Garmaise

Prices skyrocketed 7.5% in January, when inflation spiked the largest increase from the previous year: since February 1982, the US Labor Department said Thursday. 

Worker shortages, outsize government spending, ultra-low interest rates, and healthy consumer spending pushed up prices, the AP reported.

To drive down prices, officials from the US Federal Reserve, the country’s central bank, announced they will raise interest rates, which will slow down consumer and commercial spending that would require loans.

To maintain economic stability in the US, the officials on the Fed’s rate-setting Federal Open Market Committee meet eight times a year to analyze employment and inflation to decide whether to raise or lower interest rates, according to bankrate.com. 

Few signs yet indicate that prices will come down anytime soon, as ports and warehouses in Los Angeles and Long Beach, the nation’s busiest, are still overwhelmed because hundreds of dockworkers called in sick last month. As a result, shortages of products and parts have caused worldwide decreases in supplies of consumer goods. 

Whenever consumer demand outpaces supply: prices increase. Economists say that the surge in spending that increased wages and a reopening of businesses created will balance out soon, CNN Business said.

As workers return to work to reestablish supply chains and higher interest rates cool off financial activity, economics are optimistic that prices will come down eventually.