Inflation in the US has reached 8.5% – the highest annual increase in more than 40 years.
The surge in the year to March was fuelled by growing costs for food, fuel, housing and other necessities that have outstripped the pay rises that many Americans have received.
The consumer price index (CPI) used to measure inflation was up 1.2% from February, representing the biggest monthly gain since September 2005, according to the labour department.
A key driver of inflation was fuel prices that surged after Russia’s invasion of Ukraine, with the average price for a gallon of petrol peaking in the US at $4.33 on 11 March.
As part of sanctions against Moscow, the US banned imports of Russian oil, liquefied natural gas and coal.
Food prices – another contributor to growing US inflation – were also affected by the war as Russia and Ukraine are major exporters of food supplies like wheat and sunflower oil.
“Core prices” – which strip out the impact of fuel and food – were up too, climbing 6.5% in the year to March. This was up from 6.4% in February.
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Rising rents played another role as people returned to cities following COVID-19 lockdowns that had driven down prices.
Tuesday’s inflation figure, which came in slightly above the 8.4% predicted by economists, is the highest reading since December 1981 and is likely to cement the case for the US central bank to increase its interest rate by 0.5% next month.
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Last month it raised its interest rate by 0.25% – the first hike in more than three years – in a bid to address spiralling inflation.
On the plus side, core inflation appears to be slowing down, rising 0.3% from February, less than the 0.5% estimate.
“The big news in the March report was that core price pressures finally appear to be moderating,” wrote Andrew Hunter, senior US economist at Capital Economics.
He is among experts who believe inflation could peak in March.
Earnings, which have risen 5.6% year-on-year, have failed to keep up with the rising cost of living, resulting in a drop in real terms.
Inflation is a growing problem for governments around the world, with the UK figure hitting a 30-year high of 6.2% in February and is predicted to rise further on Wednesday.