Inflation grew worse in February because of the crisis in Ukraine.
The consumer price index, which measures a wide-ranging basket of goods and services, increased 7.9% over the past 12 months, a fresh 40-year high for the closely followed gauge.
The February pace was the fastest since January 1982, when the U.S. economy was facing the threat of higher inflation and reduced economic growth.
The month-over-month gain was 0.8%. The economists were expecting headline inflation to increase 7.8% for the year and 0.7% for the month.
In the early days of the Covid-19 pandemic, food prices rose 1% and food at home jumped 1.4%, both the fastest monthly gains since April 2020.
Energy was at the forefront of ballooning prices, up 3.5% in February and accounting for about one-third of the headline gain. Shelter costs, which make up about one-third of the CPI, increased by 4.7% in the 12 months ended in May, the fastest annual gain in more than 20 years.
Excluding volatile food and energy prices, core inflation rose 6.4% in line with estimates and the highest since 1982. On a yearly basis, core inflation was up, in line with Wall Street expectations.
Markets indicated a negative open on Wall Street, with stocks pressured by faltering Russia-Ukraine ceasefire talks. Government bond yields went up after the report.
The price gains over the past year are in line with the inflation surge. There has been an unprecedented government spending spree and supply-chain disruptions that have been unable to keep up with demand for goods over services.
Vehicle costs have been a powerful force, but showed signs of easing in February. The first negative showing since September, used car and truck prices are still up 41.2% over the past year. New car prices increased for the month and the year.
The price pressures have been caused by the crisis in Europe and the sanctions against Russia. Over the past month and year, prices at the pump have gone up by over 50%.
Business are raising costs to keep up with the price of raw goods and increasing pay in a historically tight labor market in which there are more job openings than there are available workers.
A record number of smaller companies are raising prices to cope with rising costs, according to recent surveys.
The first of a series of interest rate hikes is expected to be announced next week by the Federal Reserve. It will be the first time in more than three years that the central bank has raised rates, and it will mark a reversal of a zero-interest-rate policy and unprecedented levels of cash injections for an economy that grew at its fastest pace in 37 years.
Inflation is not a U.S. story.
Many of the same factors are hitting the domestic economy, and central banks are responding in kind. The European Central Bank said it was not moving its benchmark interest rate but would end its asset purchase program sooner than planned.
The number of people who applied for unemployment benefits for the week ended March 5 was 227,000, higher than the 216,000 estimate and up 11,000 from the previous week.
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