Consumer prices climb 7% in the past year, highest jump since 1982

The latest government data on inflation indicates consumer prices are continuing their rapid rise as pandemic-battered supply chains struggle to keep up with rebounding consumer demand.

The consumer price index -- a measure of the prices Americans pay for a market basket of everyday goods and services -- jumped 7% over the last 12 months, the Labor Department said Wednesday. This marks the largest one-year increase since the period ending in June 1982, the DOL noted.

The index climbed 0.5% in December, a slight reprieve from the 0.8% seen in November.

The fresh data comes as economists and policymakers decide how to respond to inflation as data indicates it isn't going away on its own the way many initially proclaimed. Federal Reserve Chair Jerome Powell said Tuesday the Fed is prepared to raise interest rates faster than originally planned to respond to the climbing prices.

The rate of inflation's climb is "far outstripping the wage growth of most Americans and squeezing the buying power of households," Greg McBride, the chief financial analyst at Bankrate, told ABC News via email on Wednesday shortly after the report's release.

"The headline rate of inflation accelerated on an annual basis, hitting 7%, but did decelerate on a monthly basis for the second month in a row, owing to a decline in energy and slower increases in food prices," he added. "But core consumer prices are still rising at an outsized pace and have not shown signs of deceleration."

As a result, McBride said rate hikes and tapering of pandemic bond-buying programs from the Fed "are likely to begin as soon as March."

The so-called core index, or measure for all items except the more volatile food and energy indices, climbed 5.5% over the last year -- the largest 12-month change since February 1991. The core index spiked 0.6% in December, building on the 0.5% increase seen in November.

President Joe Biden reacted to the report in a statement later Wednesday, calling the slight dip last month in the data as "progress."

"Today’s report -- which shows a meaningful reduction in headline inflation over last month, with gas prices and food prices falling -- demonstrates that we are making progress in slowing the rate of price increases," the president said. "At the same time, this report underscores that we still have more work to do, with price increases still too high and squeezing family budgets."

After a steady march upwards all year, the gasoline index fell by 0.5% in December -- a modest dip that comes after rising 6.1% in both November and October. In December, the food index spiked by 0.5%, still an increase but a more modest one than the spikes seen in previous months.

Biden added that inflation is a "global challenge" and "appearing in virtually every developed nation as it emerges from the pandemic economic slump."

"America is fortunate that we have one of the fastest growing economies -- thanks in part to the American Rescue Plan -- which enables us to address price increases and maintain strong, sustainable economic growth," the president said. "That is my goal and I am focused on reaching it every day."

The energy index alone rose a whopping 29.3% over the last year (driven by hikes in the gas index) and the food index increased 6.3%.

Steep climbs in the prices for shelter, used cars and trucks largely pushed the index higher in December, the DOL said, but the indices for household furnishings, apparel, new vehicles and medical care also increased. The indices for motor vehicle insurance and recreation were among the few to decline last month.

Powell also said Tuesday in testimony before lawmakers that inflation poses a threat to the post-pandemic recovery of the labor market, where hiring has stalled in recent months and unemployment remains elevated compared to pre-pandemic levels.

The Fed chief vowed to take action, however, to prevent inflation from becoming "entrenched" in the economy.

"We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing, and transportation," Powell told lawmakers on the Senate Banking Committee. "We are strongly committed to achieving our statutory goals of maximum employment and price stability. We will use our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched."