The Federal Reserve is prepared to accelerate planned interest rate hikes as the inflation rate soared to 7 percent.
Prices paid by US consumers have jumped to 7 percent in December from a year earlier, the highest inflation rate since 1982.
It is the latest evidence that rising costs for food, rent and other necessities are heightening the financial pressures on America's households.
Inflation has spiked during the recovery from the pandemic recession as Americans have ramped up spending on goods such as cars, furniture and appliances.
Those increased purchases have clogged ports and warehouses and exacerbated supply shortages of semiconductors and other parts.
Gas prices have also surged, in part because Americans have driven more in recent months after having cut back on travel and commuting earlier in the pandemic.
Rising prices have wiped out the healthy pay increases that many Americans have been receiving, making it harder for households, especially lower-income families, to afford basic expenses.
Poll show that inflation has started displacing even the coronavirus as a public concern, making clear the political threat it poses to President Joe Biden and congressional Democrats.
FED to raise key rate
On Tuesday, Chair Jerome Powell told Congress that the Federal Reserve was prepared to accelerate the interest rate hikes it plans to begin this year if it deems it necessary to curb high inflation.
Fed officials have estimated that they will raise their benchmark short-term rate, now pegged near zero, three times this year.
Many economists envision as many as four Fed rate hikes in 2022.
Those rate increases would likely increase borrowing costs for home and auto purchases as well as for business loans, potentially slowing the economy.
'Toughest inflationary environment in years'
In the meantime, many US restaurants have been passing some of their higher labor and food costs on to their customers in the form of higher prices.
So far, many consumers seem willing to pay more.
Gene Lee, CEO of Darden Restaurants, which owns Olive Garden and other brands, told investors recently that this is “the toughest inflationary environment we’ve seen in years.”
The company said its food and beverage costs jumped 9 percent during the quarter, and its hourly wage costs rose nearly 9 percent as it raised pay to attract workers.
Darden said it raised its prices, in turn, by 2 percent during the quarter and expects to raise them by 4 percent over the next two quarters to help compensate.