Inflation rises to 7% in December, highest in four decades

Economists say the Federal Reserve may fight inflation by raising interest rates

Those high prices we've been paying just keep getting higher.

Those high prices we’ve all been paying keep getting higher.

The Bureau of Labor Statistics released the Consumer Price Index for December Wednesday. Prices were up 7% over the same time last year. That’s the biggest jump in four decades.

We’re seeing it across the board--cars, food, energy and housing. Economists say this is all tied to COVID, supply chain issues and labor shortages.

They add the government gave out a lot of money during the pandemic, like stimulus checks. In 2020, people weren’t spending as much.

Pent-up savings is leading to higher demand. While it’s frustrating for people, economists warn wages shouldn’t increase at a rapid rate.

“It becomes its own self-fulfilling prophecy, where people are demanding higher wages,” Professor of Economics at the University of Lynchburg Gerald Prante says. “Then costs get pushed up and it becomes a cycle. That’s what we don’t want to see is this wage spiral out of control.”

The big question will be what the Federal Reserve does to try to control inflation. Economists say we could see interest rates rise because of this.

About the Author:

Kortney joined the 10 News team as a Lynchburg Bureau Reporter in May 2021.