US inflation hit fresh 40-year high of 7.9% before crude oil spike

US consumer price gains accelerated in February to a fresh 40-year high on rising gasoline, food and housing costs, with inflation poised to rise even further following Russia’s invasion of Ukraine. 

The consumer price index jumped 7.9 per cent from a year earlier following a 7.5 annual gain in January, the Labor Department data showed on Thursday. The widely followed inflation gauge rose 0.8 per cent in February from a month earlier, reflecting higher gasoline, food and shelter costs. 

Excluding volatile food and energy components, so-called core prices increased 0.5 per cent from a month earlier and 6.4 per cent from a year ago.

The price spike has pushed the Federal Reserve to end two years of near-zero interest rates, likely starting with a quarter-point hike next week. It’s also sunk President Joe Biden’s approval ratings ahead of November’s midterm elections that may cost Democrats their thin congressional majorities, especially as inflation outpaces wage gains.

While February was once forecast as the peak for US inflation, now readings are set to increase to above 8 per cent, according to some economists. That’s because the Ukraine war and Biden’s ban on Russia energy imports tightened oil supplies and sent prices of US retail gasoline and other commodities to some of the highest on record this month.

“Inflation is not likely to roll over and begin to come down for several more months,” Michael Gapen, chief US economist at Barclays said on Bloomberg Television.