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Consumer prices were up 6.8% in November — the highest inflation in nearly 4 decades

AUDIE CORNISH, HOST:

In the summer of 1982, Ronald Reagan was in the White House. At the movies, ET was phoning home while Paul McCartney and Stevie Wonder were topping the Billboard chart.

(SOUNDBITE OF SONG, "EBONY AND IVORY")

PAUL MCCARTNEY AND STEVIE WONDER: (Singing) Ebony, ivory, living in perfect harmony. Ebony...

CORNISH: Now, on a less happy note, that was also a period of high inflation, and we haven't seen similar price hikes for almost four decades until now. We learned today that consumer prices in November were up 6.8% from a year ago. That's the biggest increase since 1982. NPR's Scott Horsley joins us now.

And, Scott, thank you for bringing us down memory lane...

SCOTT HORSLEY, BYLINE: (Laughter).

CORNISH: ...Until you got to the bumpy part. What's behind this big jump in prices?

HORSLEY: Well, Audie, about half the increase in November was energy and cars, especially gasoline and natural gas, which a lot of people use to heat their houses. New car prices were up 11% if you can find one. Automakers are still struggling with that shortage of computer chips, and that's created a lot of demand for used cars, which were up a whopping 31%. Now, there could be some relief on the horizon. Since these numbers were crunched, gasoline prices have dropped a bit. Natural gas prices have come down a lot, and there are signs that used car prices may have peaked and might start to come down soon. But then other things like rent are still climbing, and that could keep inflation high for a while to come. You know, before the pandemic, a lot of businesses didn't feel like they could raise prices without losing customers. But right now, there's just a lot of demand, not enough supply, and so a lot of businesses feel like they can raise prices and people will pay.

CORNISH: There are also people who are getting pay raises - right? - who are facing a better job market. How does all that figure into this?

HORSLEY: You're right. Average pay is going up, but prices are climbing even faster. So on average, people are seeing their buying power eroded, and they're not happy about it. In a recent survey, a majority of Americans told The Associated Press inflation is affecting their financial lives. About 40% said they were feeling a substantial hit. The White House is acutely aware of this. President Biden says he understands inflation is taking a toll.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT JOE BIDEN: It's a real bump in the road. It does affect families. When you walk in the grocery store and you're paying more for whatever you're purchasing, it matters. It matters to people. When you're paying more for gas - although in some states, we've got the price down below three bucks a gallon. But the point is it's not gone down quickly enough, but I think it will.

HORSLEY: The administration has been working to relieve some of the supply chain bottlenecks that have been contributing to these higher prices, but that is not easy. And, you know, Republicans hope to capitalize on this economic pain. Florida Senator Rick Scott, who leads the GOP Senate campaign arm, told The Wall Street Journal rising prices are a gold mine for his party.

CORNISH: But it's actually the responsibility of the Federal Reserve to keep inflation in check, so what kind of action could we see from the central bank?

HORSLEY: You know, for much of the last year, the central bank has underestimated inflation and its staying power. But in recent weeks, Fed Chairman Jerome Powell has taken a tougher line. He's definitely sounding more cautious about the direction that inflation is going.

(SOUNDBITE OF ARCHIVED RECORDING)

JEROME POWELL: I'd say almost all forecasters do expect that inflation will be coming down meaningfully in the second half of next year. That's an expectation. The point is we can't act as though we're sure of that. We're not at all sure of that. Inflation has been more persistent and higher than we've expected, and we have to use our policy to address the range of plausible outcomes.

HORSLEY: You know, Fed policymakers had already announced plans to gradually phase out the bond-buying program they launched early in the pandemic to support the economy. Now it looks like that phaseout is going to happen faster, and that would give the Fed more flexibility to raise interest rates to keep inflation from spiraling out of control.

CORNISH: That's NPR's Scott Horsley.

Scott, thank you.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.