Inflation struck a high point in December and reached an annual rate of 7%, the highest since 1982.

The Bureau of Labor Statistics (BLS) on Wednesday released its latest Consumer Price Index (CPI), showing inflation reached 0.5% in December after an 0.8% increase in prices during November. Annual inflation hit 5.5% when excluding more volatile food and energy prices, reaching a level not seen since February 1991.

Forecasts prior to the data release largely lined up with the readings seen on Wednesday, which expected a level of yearly inflation that proved accurate. The change in monthly inflation was expected to be 0.4%.

A rise in car and housing prices were the largest contributors to the high CPI rating. However, Jason Furman, a professor in economics at the Harvard Kennedy School, warned that the damage may not yet be done and that the service sector would soon see its prices follow the path of goods.

"Durable goods inflation should come down as supply chains unsnarl, but what will happen to services is the big question," tweeted Furman, who was chairman of former President Barack Obama's Council of Economic Advisers. "One reason to expect services to rise more is that they include shelter, which includes rent and owner's equivalent rent. The CPI is showing a much smaller increase than other measures."

Last year was characterized by steadily rising inflation over ongoing supply chain bottlenecks that are leaving supplies in an inadequate place to meet soaring demand.

Initially, the White House and Federal Reserve expected inflation to be transitory, that it would gradually ease and come down as these bottlenecks resolved themselves. However, this prospect became more complicated with the detection of the Omicron variant of COVID-19. 

The pressure felt by inflation has prompted a turnaround at the Fed, pushing it to abandon its transitory view of inflation and instead take on a more hawkish position. On Tuesday, Fed Chairman Jerome Powell said the Fed stood ready to do what was necessary to keep high inflation from becoming "entrenched." 

“If we see inflation persisting at high levels longer than expected, then if we have to raise interest rates more over time, we will,” Powell said. “We will use our tools to get inflation back.”

He maintained the central bank’s readiness to speed up the end to its monthly stimulus spending and begin hiking interest rates in 2022. In December, Powell announced a tentative schedule to hiking rates with three to four hikes expected.

In his testimony Tuesday before the U.S Senate, Powell declared the central bank’s tapering off of stimulus spending would end in March.