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US inflation hits fresh four-decade high – even before Ukraine war added to price pressures

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US inflation surged to a new four-decade high last month according to the latest official figures – even before the latest oil price spikes that threaten to worsen cost of living woes.

The consumer price index measure of inflation climbed to 7.9% in February, up from 7.5% at the start of the year and the highest rate since January 1982.

A key factor behind the increase is soaring energy costs, with fuel prices up 38% year on year and natural gas rising 23.8%.

President of the United States of America Joe Biden
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Joe Biden has blamed Vladimir Putin for the expected futher rise in fuel prices

They could soar further after US and UK plans to cut off Russian oil imports pushed the price of Brent crude on global markets higher.

That is a headache for US President Joe Biden who, facing midterm elections later this year, has admitted motorists will face further increases at the pumps and blamed Russia for them.

Mr Biden said this week he would do all he could “to minimise Putin’s price hike here at home” and America has been trying to persuade oil-exporting countries to bump up production.

Grocery prices are also surging – with prices up 8.6% over the last 12 months, representing the highest year on year rate since April 1981.

That is another sector under pressure as a result of the war in Ukraine, which has prompted sharp rises in a range of commodities including wheat, corn and cooking oils.

Next week, the Federal Reserve – America’s central bank – is widely expected to raise interest rates after they were slashed during the pandemic, as it responds to the inflation surge.

Brent crude oil price chart year to date 10/3/22
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Oil prices have surged

For most workers, it is running well ahead of pay growth, creating a potent cost of living political threat to Mr Biden and Democrats ahead of those midterm elections in November.

The latest figures illustrate the surge in prices taking place even before the war thanks to buoyant consumer spending and pay rises as well as supply shortages.

But the consequences of the invasion of Ukraine have upended assumptions that inflation would start to ease this spring.

Eric Winograd, senior economist at asset management firm AllianceBernstein, said: “The numbers are eye-watering and there is more to come.

“The peak in inflation will be much higher than previously thought and will arrive later than previously expected.”

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