Key Inflation Gauge Reaches 40-Year High as Prices Surge

by Joe Rutland
(Bill Clark/CQ-Roll Call, Inc via Getty Images)

A key inflation gauge closely monitored by the Federal Reserve has reached a 40-year high as prices continue to rise across the United States during these times of rising inflation. If you include food and energy prices, then the inflation gauge jumped 6.4% in February. That’s from the previous year, the largest gain since February 1982. 

What To Know

  • Inflation continues to rise as a key gauge has reached a 40-year high.
  • Core prices are up by 5.4% year-to-year, according to new data released.
  • Energy costs have risen 25.7% from a year ago.

Core Prices Measurement Goes Into Inflation Gauge Status

Core prices, which exclude the more volatile measurements of food and energy, soared by 5.4% in the year through February. This is according to the personal consumption expenditures price index data released Friday morning. That measurement is the Fed’s preferred inflation gauge. It also marks the 11th consecutive month the measure has been above the central bank’s target range of 2%. 

Between January and February, core prices soared 0.4%. The headline gain shot up by 0.6%. Fortune 500 leaders are keeping their eyes on inflation, too.

Meanwhile, the inflation spike largely reflected surging energy costs, which rose 25.7% from a year ago. Food costs were up 8% over that same time period. We get more from Fox Business. The PCE report was accompanied by data on household spending. That shows consumer spending rose faster than expected last month, climbing by 2.7%. The spending increase followed a 2.1% jump in December.

The data is further evidence of a spike in prices illustrated by a separate measure. It is reflected in the Consumer Price Index, which showed inflation rose by 7.9% in February from the previous year, a fresh 40-year high. 

Many Inflation Issues Have Affected A Lot of American Households

Raging inflation has inflicted financial pain on millions of U.S. households, particularly low-income families. This erodes wage gains and sets up a massive political challenge for President Biden. His approval ratings have been sinking in conjunction with the rising prices. It has also forced the Federal Reserve and Chairman Jerome Powell to concede that surging prices are not transitory. They are taking steps to dramatically normalize policy.

Americans’ overall incomes rose 0.5% in February, the highest gain since November and up from just 0.1% in January. Wages and salaries jumped 0.8%, the most in four months. We get more from ABC News. Businesses have been raising pay to attract and keep employees — a trend that is benefiting workers but also giving employers cause to raise prices to offset their higher labor costs. That cycle is helping fuel inflation.

Last month, food costs climbed 1.4%, the most in nearly two years. Energy costs spiked 3.7%, the biggest such increase since October.