US inflation hits 39-year high in November

US inflation surged to a 39-year high in November amid supply constraints, according to figures released on Friday by the Labor Department.

Consumer prices rose 0.8% on the month, down from 0.9% growth in October and taking the annual rate to 6.8%, up from 6.2% the month before. This marked the biggest annual jump since 1982.

Core CPI, which strips out volatile items such as food and energy, rose 0.5% in November from a 0.6% increase the month before. Over the last 12 month, core CPI increased 4.9% - the largest annual increase since the period ending June 1991.

Paul Ashworth, chief US economist at Capital Economics, said: "The biggest problem for the Fed is the mounting evidence of a strong pick-up in cyclical price pressures. In addition to the big jump in food away from home prices, rents and owners' equivalent rent both increased by 0.4% m/m.

"The upshot is that, although we think headline inflation has now peaked, it will decline only gradually over the first half of next year and, crucially, because of that building cyclical pressure we expect core inflation to remain above the Fed's 2% target for a prolonged period."

Kathy Bostjancic, chief US financial economist at Oxford Economics, said: "The elevated and sticky rate of inflation has front-run the Fed’s original plans envisioned under the FAIT (Flexible Average Inflation Targeting) framework.

"The FOMC now sees it as its top priority to ensure that inflation moderates back towards the long-run 2% inflation target in order to promote a long-lasting economic expansion that brings about maximum employment over time. The Fed will likely double its pace of QE tapering and this could force the Fed to lift-off rates prior to our September call."