A key inflation metric monitored by the Federal Reserve soared 6.4 percent in February compared to a year ago, reaching a new 40-year high.
The latest price surge, which affected the price of fuel, groceries and other consumer essentials, represents the largest year-over-year increase since January 1982, according to data released by the Commerce Department on Thursday.
Not taking into account food and energy fluctuations, which tend to be more erratic and can overemphasize inflation, the personal consumption expenditures price index, the preferred inflation gauge of the Federal Reserve, jumped 5.4 percent in February from a year prior. Including gas and groceries, PCE surged 6.4 percent.
Amid persistent supply chain problems, the inflationary pressures have intensified due to Russia’s invasion of Ukraine, which has suffocated energy markets and triggered a chain reaction of price leaps across other sectors.
Consumer spending in February, only 0.2 percent, fell below projections of 0.5 percent, showing that the mounting inflation has imposed significant costs on the American wallet, namely the diminution of purchasing power. The increase in disposable income, 0.4 percent for the month, also missed the 0.5 percent projection. Real disposable income dropped 0.2 percent, factoring in the rising cost of living nearly nationwide.
After insisting for many months that the persistent inflation trend was “transitory,” the Fed abandoned that reasoning and has pivoted to a monetary tightening regime this quarter. The central bank increased interest rates in March and is expected to add additional hikes at each of the remaining meetings this year to curb inflation.