WASHINGTON (AP) – Inflation surged at its fastest pace in nearly 40 years last month, spiking 7% from a year earlier that is pushing up household spending, eating away at wage gains and is putting pressure on President Joe Biden and the Federal Reserve to tackle a growing threat to the US economy.

Prices have risen sharply for cars, gasoline, food and furniture during a rapid recovery from the pandemic recession. Americans have increased spending because of labor and raw material shortages that have squeezed supply chains.

The Labor Department reported on Wednesday that excluding volatile food and gas prices, so-called base prices jumped 0.6% from November to December. Measured year over year, basic prices jumped 5.5% in December, the fastest increase since 1991.

Rising prices have erased the healthy wage increases many Americans have received, making it harder for households, especially low-income families, to pay for basic expenses. Polls show inflation has started to displace even the coronavirus as a public concern, clearly highlighting the political threat it poses to President Joe Biden and the Democrats in Congress.

A significant portion of inflation is still fueled by mismatches caused by a pandemic between demand and supply. Used car prices have climbed more than 37% over the past year as new car production has been constrained by semiconductor shortages.

Shortages and higher prices in U.S. grocery stores have also increased in recent weeks as new issues, like the omicron variant and inclement weather, have compounded supply chain problems.

Many restaurants have passed on higher labor and food costs to their customers. Darden Restaurants, the company that owns Olive Garden, LongHorn Steakhouse and other chains, said it raised prices by 2% late last year and expects to increase prices an additional 4% over the course of the next six months.

Darden CEO Gene Lee recently told investors it was “the toughest inflation environment we’ve seen in years.”

President Jerome Powell told Congress on Tuesday that if it becomes necessary to fight high inflation more aggressively, the Federal Reserve is ready to accelerate interest rate hikes it plans to begin this year. . Fed officials have estimated they will hike their short-term benchmark rate, now close to zero, three times this year. Many economists envision up to four Fed rate hikes in 2022.

These rate hikes would likely increase borrowing costs for home and auto purchases as well as business loans, potentially slowing the economy. The rate hikes also mark a sharp turnaround in policy on the part of Fed policymakers, who, as recently as September, were divided over whether to raise rates even once this time. year. The Fed is also quickly ending its monthly bond purchases, which were aimed at lowering long-term interest rates to encourage borrowing and spending.

Yet the Fed’s swift pivot has not quelled questions from many former Fed officials, economists and some senators as to whether the Fed has acted too slowly to end its ultra-interest rate policies. low in the face of accelerating inflation – and put the economy at risk as a result.

In his testimony to Congress on Tuesday, Powell said the Fed mistakenly believed the supply chain bottlenecks that helped drive up commodity prices would not last as long as they did. . Once supply chains were unlocked, he said, prices would come down again.

Still, for now, supply issues have persisted, and while there are signs they are easing in some industries, Powell acknowledged that progress has been limited. He noted that many cargo ships remain moored outside the Port of Los Angeles and Long Beach, the largest in the country, awaiting unloading.

With the Biden administration facing public discontent with rising inflation, the president said his administration’s investments in ports, roads, bridges and other infrastructure would help loosen the chains of rumbling supplies.