What's going on?

Data out on Wednesday showed that US consumer prices rose at their fastest pace last month since the early �80s, but who you gonna call?

What does this mean?

US consumer prices were 7% higher in December than they were the same time the year before � the biggest jump in 39 years and up on November�s 6.8% gain. And sure, energy and food prices were up by 29% and 6% respectively. But if your latest bank statement made you wince, it�s not just because you filled up on snacks and cranked up the heating in December: clothing, rent, and used cars were all much more expensive too, rising by around 6%, 4%, and 37% respectively. That might go some way to explaining why core inflation � which strips out unstable food and energy prices � rose by the most since 1991.

Why should I care?

For markets: �All win, no lose.�
This data will only fuel expectations that the Federal Reserve (the Fed) will start raising interest rates as soon as March to keep rising prices in check. Still, it�s been trying to put everyone�s minds at rest: the central bank said this week that it can bring down inflation without interrupting economic growth, since plenty of the pandemic-driven shortages should ease on their own. In other words, it mightn�t need heavy-handed rate hikes to do all the work. Investors seemed reassured, sending the US stock market up and putting an end to its five-day losing streak.

The bigger picture: The Fed�s setting an example.
The US isn�t alone: data out from the OECD � an intergovernmental economic organization � showed average inflation across the world�s richest economies was 5.8% higher in November than the same time in 2020 (tweet this). If that trend continues, other central banks could be forced to follow the Fed�s lead and raise rates this year too.