Households squeezed as U.S. consumer prices accelerate, more pain coming

U.S. consumer prices surged in February, forcing Americans to dig deeper to pay for rent, food and gasoline, and inflation is poised to accelerate even further as Russia's war against Ukraine drives up the costs of crude oil and other commodities.

Households squeezed as U.S. consumer prices accelerate, more pain coming

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U.S. consumer prices surged in February, forcing Americans to dig deeper to pay for rent, food and gasoline, and inflation is poised to accelerate even further as Russia's war against Ukraine drives up the costs of crude oil and other commodities.

The broad rise in prices reported by the Labor Department on Thursday led to the largest annual increase in inflation in 40 years. Inflation was already haunting the economy before Russia's invasion of Ukraine on Feb. 24, and could further erode President Joe Biden's popularity.

The Federal Reserve is expected to start raising interest rates next Wednesday. With inflation nearly four times the U.S. central bank's 2% target, economists are expecting as many as seven rate hikes this year.

Lower-income households bear the brunt of high inflation as they spend more of their income on food and gasoline.

"Consumers' shock at rapidly rising gas prices at the pump will continue to put pressure on the Fed and policymakers to do something, anything, to slow down the speed at which prices everywhere are moving higher," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

The Federal Reserve is expected to start raising interest rates next Wednesday. With inflation nearly four times the U.S. central bank's 2% target, economists are expecting as many as seven rate hikes this year.

Lower-income households bear the brunt of high inflation as they spend more of their income on food and gasoline.

"Consumers' shock at rapidly rising gas prices at the pump will continue to put pressure on the Fed and policymakers to do something, anything, to slow down the speed at which prices everywhere are moving higher," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

Prices for fruit and vegetables increased by the most since March 2010, while the rise in the cost of dairy and related products was the largest in nearly 11 years.

In the 12 months through February, the CPI shot up 7.9%, the biggest year-on-year increase since January 1982. That followed a 7.5% jump in January and was the fifth straight month of annual CPI readings north of 6%. February's increase in the CPI was in line with economists' expectations.

Last month's CPI data does not fully capture the spike in oil prices following the outbreak of the war in Ukraine. Prices shot up more than 30%, with global benchmark Brent hitting a 2008 high at $139 a barrel, before retreating to trade around $112 a barrel on Thursday.

The United States and its allies have imposed harsh sanctions on Moscow, with Biden on Tuesday banning imports of Russian oil into the United States. Russia is the world's second-largest crude oil exporter.

U.S. gasoline prices are averaging a record $4.318 per gallon compared with $3.469 a month ago, AAA data showed.

Biden on Thursday acknowledged the hardships Americans were facing from sky-rocketing prices, but blamed Russian President Vladimir Putin's actions.

"As I have said from the start, there will be costs at home as we impose crippling sanctions in response to Putin's unprovoked war, but Americans can know this, the costs we are imposing on Putin and his cronies are far more devastating than the costs we are facing," Biden said in a statement.

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