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U.S. Inflation Surges To Near 40-Year High 6.8% In November; Stocks Gain As Headline Matches Forecasts

U.S. inflation surged to the highest levels since the Reagan era last month, with headline CPI jumping to an annual rate of 6.8%.

U.S. inflation accelerated to the fastest pace in four decades last month, data from the Bureau of Labor Statistics indicated Friday, as surging energy, rent and used car costs continue to add upward pressure on consumer prices.  

Headline CPI for the month of November was estimated to have risen 6.8% from last year, up from the 6.2% pace in October and the fastest rate since June of 1982, powered largely by used and new cars and surging rental costs. On a monthly basis, inflation was up 0.8%, the BLS said, with both tallies essentially matching Wall Street forecasts.

So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.5% on the month, and 4.9% on the year, the highest in 30 years, the report noted, with both readings again matching the Street consensus forecast.

"Inflationary pressures are building in the economy and that is going to force the Fed’s hand," said Chris Zaccarelli, CIO for the Independent Advisor Alliance. "Specifically, the Fed is going to have to increase the pace of their tapering plans – potentially reducing their buying twice as quickly, down by $30 billion/month instead of $15 billion/month – and then look to either balance sheet reduction or interest rate hikes, in order to combat inflation."

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U.S. stocks traded modestly higher in the wake of the data release, with the Dow Jones Industrial Average gaining indicating a 115 point opening bell decline and those linked to the S&P 500 booking a 20 point move to the upside.

Benchmark 10-year U.S. Treasury bond yields, meanwhile, edged lower, to 1.467%, following a successful auction earlier this week, while 2-year notes were marked at 0.68%.

The CME Group's FedWatch tool is showing an 81.5% chance of a rate hike in June of next year, up from around 50% at the beginning of November.

The Atlanta Federal Reserve's GDPNow forecasting tool, a real-time benchmark, suggests the U.S. economy is growing at an 8.7% clip, although that tally was dented by the emergence of the Omicron variant late last month. Prior readings put the growth rate at 9.7%.