Inflation builds with biggest price jump since 1990

U.S. consumer prices rose last month at the fastest annual pace since 1990, cementing high inflation as a hallmark of the pandemic recovery and eroding spending power even as wages surge.

The consumer price index increased 6.2% from October 2020, according to Labor Department data released Wednesday. The CPI rose 0.9% from September, the largest gain in four months. Both advances exceeded all estimates in a Bloomberg survey of economists.

Higher prices for energy, shelter, food and vehicles fueled the supercharged reading and indicated inflation is broadening out beyond categories associated with reopening.

Stocks opened lower, while the yield on the 10year Treasury rose and the dollar strengthened.

Against a backdrop of solid demand, businesses have been steadily raising prices for consumer goods and services at the same time supply chain bottlenecks and a shortage of qualified workers drive up costs.

The pickup suggests higher inflation will be longer-lasting than previously thought, putting pressure on Federal Reserve officials to end nearzero interest rates sooner than expected and potentially to quicken the pace of the bond-buying taper announced last week.

The data also threaten to exacerbate political challenges for President Joe Biden and Democrats as they seek to pass a nearly $2 trillion tax-and-spending package and defend razor-thin congressional majorities in next year’s midterm elections.

A report on Tuesday showed prices paid to U.S. producers also accelerated last month, largely due to higher goods costs, and adding to concerns about persistent price pressures across the globe.

Excluding the volatile food and energy components, socalled core inflation rose 0.6% from the prior month and 4.2% from a year earlier. The annual increase was the largest since 1991.

Shelter costs — which are considered to be a more structural component of the CPI and make up about a third of the overall index — rose 0.5% in October, the most in four months as higher rents and home prices feed into the data. The cost of hotel stays increased.

Americans are also facing higher costs for basic necessities:

Food up 5.3% from year ago, most since January 2009

Gasoline rose 6.1% from September, biggest gain since March

Electricity costs jumped 1.8%, largest monthly increase since 2014

Fuel oil advanced 12.3% from prior month, most since 2007