Consumer prices in the United States rose 6.8% in November compared to the previous period a year ago, as rising costs for food, energy, shelter and other commodities resulted in the highest annual inflation rate since 1982. The Labor Department also announced Friday that prices rose 0.8 percent from October to November.
Consumers, especially low-income households, bear the brunt of inflation, especially with regard to basic necessities. It has also overshadowed the rise in wages for many employees, hampered the Federal Reserve’s efforts to remove economic stimulus, and coincided with waning popular support for US President Joe Biden. A combination of variables resulting from the rapid recovery from the pandemic crisis fueled inflation: government stimulus measures, Fed-designed ultra-low rates, and supply shortages to factories in the United States and elsewhere. Stronger-than-expected customer demand, COVID-related closures and overloaded freight ports and stations have all hampered manufacturers.
Employers in the United States have raised wages in response to labor shortages, and many have raised prices to offset higher labor costs, contributing to inflation. As a result, the prices of everything from groceries to used cars, gadgets, home furnishings and rental cars have increased. The price hike, which started when the virus hit and Americans trapped in their homes overwhelmed businesses with commodity orders, have now shifted to services ranging from apartment rentals and dining out. medical care and entertainment.
Impact on India
When world prices rise, imported inflation also rises, further increasing our current account imbalance. Inflationary pressures in industrialized economies, particularly the United States, should push central banks to abandon their lax monetary policies. Higher interest rates would result from restrictive monetary policies by the Fed and other central banks. This will have a double impact on the Indian economy: firstly, it will be more costly for Indian companies to raise funds outside India. In addition, the Reserve Bank of India will have to align its monetary policy domestically by raising interest rates.
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