Inflation Hits 40 Year High

Inflation hit a new 40-year high in February. The Consumer Price Index (CPI) climbed to 7.9% year over year and 0.8% month over month from January, according to the Bureau of Labor Statistics.

As of Thursday, the U.S. national average cost of gas is $4.35 per gallon. Many economists are expecting to see this at $5 per gallon within the next 90 days.

Just as COVID related supply chain challenges were beginning to ease, the global economy is now facing increases in commodity prices which started to spike towards the end of last month as concerns over the Russian invasion of Ukraine rose.

“The latest CPI numbers actually came in around consensus, however showed a big 6.6% month-over-month spike in gasoline prices,” explained LPL Financial Quantitative Strategist George Smith. “The longer the Russia-Ukraine war and related commodity crunch continues - the more likely it’s looking that headline inflation in March will be over 8% as the effects of higher prices continue to filter through.”

Additionally, continued increases in the housing component of CPI - up 0.5% month over month - will be of particular concern for Federal Reserve (Fed) decision makers as this is one of the more ‘sticky’ components. These CPI numbers will no doubt get a lot of attention given the multi-decade highs and how close this report is to the Fed’s Federal Open Market Committee (FOMC) meeting next week.

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