More pain for Joe Biden as US inflation surges to record levels

US inflation hits its highest level in more than 30 years, reaching 6.2 per cent, worsening a major political headache for Joe Biden.

US President Joe Biden waves as he steps off Marine One upon arrival in Milford, Delaware overnight (AEDT). Picture: AFP

US inflation has shot up to the highest level in more than 30 years, reaching 6.2 per cent, worsening a major political headache for President Joe Biden and raising the prospect of higher interest rates sooner as central banks seek to clamp down on rising prices.

The US consumer price index jumped to 6.2 per cent in October from 5.4 per cent a month earlier, the highest rate of increase since December 1990, a period when the US, and other developed countries, were exiting a long period of double-digit inflation.

President Joe Biden, whose falling popularity has been blamed on increases in the cost of energy, food and rent throughout 2021, said he had ordered his officials to “to strike back at any market manipulation or price gouging in this sector”.

“Inflation hurts Americans’ pocketbooks, and reversing this trend is a top priority for me,” the President said in a statement. Inflation has been above 5 per cent for five months in a row, and prices rose 0.9 per cent in October alone.

Today’s report shows an increase over last month on inflation. Reversing this trend is a top priority.

My Infrastructure bill will bring down costs by reducing bottlenecks and I urge Congress to pass my Build Back Better Act — which will ease inflationary pressures.

— President Biden (@POTUS) November 10, 2021

The new inflation figures were a political gift for Republicans one year out from critical 2022 midterm Congressional elections, who have argued the Democrats’ big spending policies have added to inflationary pressure.

“We’re one week closer to the holidays and … Democrats are focused on spending trillions that will only make this crisis worse,” tweeted Kevin McCarthy, leader of the US Republicans in the House of representatives.

The inflationary spike will also hobble the President’s ability to convince moderate Democrats to pass the White House’s signature Build Back Better bill, stuck in Congress for months, a $US2 trillion package of increased social security and climate change spending.

“By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” said Democrat Senator Joe Manchin, one of two key senators the president needs to support the bill.

“The inflation tax is real and DC can no longer ignore the economic pain Americans feel every day,” he added.

The US 10-year bond yield rose above 1.5 per cent on the news, reflecting an increased likelihood of higher interest rates in the future to counter higher inflation.

“The largest share of the increase in prices in this report is due to rising energy costs – and in the few days since the data for this report were collected, the price of natural gas has fallen,” the president said.

Energy prices, including petrol and natural gas, have increased 30 per cent over the 12 months to October, pointing to a painful northern winter for some households, when energy costs typically rise.

The world’s oil-producing nations have repeatedly refused a White House request to pump more oil. Petrol prices rose to $US3.41 a gallon across the US this week, the highest level in seven years, up $US1.31 from a year ago.

“The index for meats, poultry, fish, and eggs continued to rise sharply, increasing 1.7 per cent following a 2.2 per cent increase in September. The index for beef rose 3.1 per cent over the month,” the US Bureau of Labor Statistics, which calculates US inflation numbers, said in a statement.

Stripping out food and energy, typically volatile items, the consumer price index was 4.6 per cent higher than a year ago, more than double the US Federal Reserve’s inflation target of 2 per cent, and the highest level since August 1991.

“Supply-driven inflation will get worse before moderating gradually in 2022,” said Oxford Economics analyst Kathy Bostjancic, reflecting the Federal Reserve’s view repeated insistence that inflation remains “transitory”.

“Ongoing supply chain bottlenecks amid strong demand will keep the rate of inflation elevated as supply/demand imbalances are only slowly resolved.”

Economists have blamed rising prices on the end of Covid-19 restrictions and repeated rounds of federal stimulus payments to US households for causing a strong demand boost at the same time as global supply chains have yet to readjust to new patterns of consumption and production.

“17 Nobel prize winners in economics have said that my plan will ‘ease inflationary pressures’,” the President said referring to his Build Back Better bill.

Rising US inflation reflects a global, if less pronounced trend; inflation in Australia rose to the highest level since 2015 in the third quarter of 2021, up 2.1 per cent on a year earlier (excluding volatile items).