EXPLAINER: Why US inflation is so high, and when it may ease

At first, it didn’t even register as a threat. Then it seemed like a temporary annoyance.

Now, inflation is flashing red for the Federal Reserve’s policymakers — and delivering sticker shock to Americans at the used car lot, the supermarket, the gas station, the rental office.

On Wednesday, the Labor Department reported that consumer prices jumped 7% in December compared with 12 months earlier — the hottest year-over-year inflation since June 1982. Excluding volatile energy and food prices, what is called “core” inflation rose 5.5% over the past year, the fastest such pace since 1991.

Bacon prices are up nearly 19% from a year ago, men’s coats and suits nearly 11%, living and dining room furniture more than 17%. Renting a car will cost you 36% more, on average, than it did in December 2020.

“Prices are increasing broadly throughout the economy, and the Federal Reserve has been caught off-guard by the extent of inflation,″ said Gus Faucher, chief economist at PNC Financial.