American inflation @ 6.2% Highest since 1990

For a nation which prides itself on usually keeping inflation rates around the 2 % mark, the current times are both anomalous and worrying. Prices (CPI) climbed 6.2% year-over-year, the largest increase since November 1990.

Inflation is not something new for the U.S. as the nation has weathered seven such episodes of lasting price surges including the current run, since World War II. Post-World War II and the crippling stagflationary period of the 1970s and early 1980s offer the closest parallels. "The question is how long it remains elevated and when it backs off and at what rate does it settle out?” While Fed policymakers have been slow to tighten in the present day, they have vowed that if inflation expectations become unhinged, they'll act. The worry, though, is that the Fed is already too late.

“The annual inflation rate in the US surged to 6.2% in October of 2021, the highest since November of 1990 and above forecasts of 5.8%. Upward pressure was broad-based, with energy costs recording the biggest gain (30% vs 24.8% in September), namely gasoline (49.6%)”

Critical supply chains are choked off. Demand soars. Prices surge and everyone starts freaking out about inflation and wonder how long it will last.

What he needs, on the other hand, is the oil price to hover in the $60-70 band (a price the world had gotten used to), and increased demand. That way, both producers and consumers can balance their books, activity in the American upstream petroleum sector would recover to its pre-pandemic levels, the American economy would crank up, and prices might be kept in check.

That’s a tough ask right now because the glut is real, and because inflation is deterring demand from rising at the requisite pace. It’s a vicious cycle which can be broken only if Biden employs some deft diplomacy; and there’s a huge question mark on whether he can do that, since his predecessors this century (other than Trump) have consistently eroded America’s traditional ability — indeed, self-ordained right — to set the international oil price.

Inflation is not something new for the U.S. as the nation has weathered seven such episodes of lasting price surges including the current run, since World War II. Post-World War II and the crippling stagflationary period of the 1970s and early 1980s offer the closest parallels. "The question is how long it remains elevated and when it backs off and at what rate does it settle out?” While Fed policymakers have been slow to tighten in the present day, they have vowed that if inflation expectations become unhinged, they'll act. The worry, though, is that the Fed is already too late.

Critical supply chains are choked off. Demand soars. Prices surge and everyone starts freaking out about inflation and wonder how long it will last.

Source: https://www.business-standard.com/article/international/us-inflation-builds-with-biggest-gain-in-consumer-prices-since-1990-121111001344_1.html

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