US inflation surges with biggest price gain in 21 years

'Consumer prices remain too high,' President Biden said after the report

Petrol prices grow along with inflation as this sign at a gas station shows in Carlsbad, California. Reuters

Prices paid by US consumers rose from a year earlier by the most since 1990, reflecting broad-based increases and adding to evidence of building inflationary pressures as companies find more success in passing on higher costs.

The consumer price index increased 6.2 per cent from October 2020, according to Labour Department data released on Wednesday.

The CPI rose 0.9 per cent from September, the largest advance in four months. Both advances exceeded all estimates in a Bloomberg survey of economists.

Higher prices for energy, shelter, food and vehicles fuelled the supercharged reading in October and indicated inflation is broadening out beyond categories associated with reopening.

President Joe Biden commented on inflation in afternoon remarks he made from Baltimore, Maryland, declaring "consumer prices remain too high".

"Everything from a gallon of gas to a loaf of bread costs more. It's worse even though wages are going up," Mr Biden continued.

"Many people remain unsettled by the economy and we all know why. They see higher prices."

He said his administration is working on addressing the economic concerns.

“We are tracking these issues and trying to figure out how to tackle them head on," he said.

Stock futures dropped after the report, while the yield on the 10-year Treasury rose and the dollar strengthened.

Against a backdrop of solid demand, businesses have been steadily raising prices for consumer goods and services at the same time supply chain bottlenecks and a shortage of qualified workers drive up costs.

The pickup suggests higher inflation will be longer-lasting than previously thought, putting pressure on Federal Reserve officials to end near-zero interest rates sooner than expected and potentially to quicken the pace of the bond-buying taper announced last week.

The data also threaten to exacerbate political challenges for Mr Biden and Democrats as they seek to pass a nearly $2 trillion tax-and-spending package and defend razor-thin congressional majorities in next year’s midterm elections.

A report on Tuesday showed prices paid to US producers also accelerated last month, largely due to higher goods costs, and adding to concerns about persistent price pressures across the globe.

In China, inflation at the factory level last month increased by the most in 26 years, while consumer prices in Brazil sped up by more than forecast.

Excluding the volatile food and energy components, so-called core inflation rose 0.6 per cent from the prior month and 4.2 per cent from a year earlier.