Inflation surges to record high in United States since 1982, testing Biden

U.S. consumer prices increased further in November as the cost of goods and services rose broadly amid supply constraints, leading to the largest annual gain since 1982, which could encourage the Federal Reserve to quickly wind down its bond purchases.

The consumer price index rose 0.8% last month after surging 0.9% in October, the Labor Department said on Friday. In the 12 months through November, the CPI accelerated 6.8%. That was the biggest year-on-year rise since June 1982 and followed a 6.2% advance in October.

Economists polled by Reuters had forecast the CPI climbing 0.7%.

The report followed on the heels of news last week that the unemployment rate fell to a 21-month low of 4.2% in November. Tightening labor market conditions were underscored by a report on Thursday showing new applications for unemployment benefits dropped to the lowest level in more than 52-years last week.

Other data this week showed there were 11 million job openings at the end of October and Americans quit jobs at near-record rates. The tight labor market is boosting wages and supply bottlenecks are showing little sign of easing, indicating that high inflation could persist well into 2022.

"With supply shortages likely to stick around until next year and service-sector prices trending higher, inflation is going to get worse before it gets better," said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.

Fed Chair Jerome Powell has said the U.S. central bank should consider speeding up the winding down of its massive bond purchases at its policy meeting next Tuesday and Wednesday. Many economists are expecting an early Fed interest rate increase.

Excluding the volatile food and energy components, the CPI rose 0.5% last month after gaining 0.6% in October. The so-called core CPI jumped 4.9% on a year-on-year basis after increasing 4.6% in October.

The Fed tracks the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, for its flexible 2% target. The core PCE price index surged 4.1% in the 12 months through October, the most since January 1991. November data will be released later this month.

"A continued trend higher in core inflation creates further hawkish risks for a Fed that has recently become more focused on the inflation side of its mandate, and suggests a rising likelihood of an even earlier first rate hike," said Veronica Clark, an economist at Citigroup in New York.