U.S. consumer prices jumped by the most in nearly four decades as the new year started, sapping the savings of American families, diminishing the purchasing power of worker paychecks, and putting pressure on the Federal Reserve to hike interest rates beginning in March. The consumer price index climbed 0.6 percent from a month before, the Department of Labor said Thursday. Compared with January of last year, consumer prices are up 7.5 percent. Economists had expected prices to rise 0.4 percent on a monthly basis and 7.2 percent above a year ago’s prices. Inflation only began to accelerate last March after years of coming in below the Fed’s two percent target. The Fed had decided to keep interest rates low although the economy was recovering at a faster than expected rate. What’s more, the Biden administration pushed through billions of dollars of deficit spending in the American Rescue Plan. These combined to fuel demand for goods and services faster than supplies could expand, pushing up prices.
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