'A Shocking Number': Experts React To 6.8% CPI Inflation, Highest Since 1982

The SPDR S&P 500 ETF Trust SPY traded higher by 0.8% on Friday morning after the Labor Department reported a 6.8% increase in the consumer price index in the month of November, the fastest inflation growth since 1982.

What Happened: The headline CPI rose 6.8% in November, exceeding economist estimates of 6.7% and marking the highest growth rate since June 1982. The CPI was up 0.8% on a monthly basis.

Core inflation, which excludes volatile food and energy prices, was up 4.9% in November, in-line with economist estimates.

Energy prices were up 3.5% month-over-month and 33.3% compared to a year ago. Used car prices were once again a major inflation driver in November as well. Used car and truck prices increased by 2.5% in November and are up 31.4% over the last 12 months.

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The latest CPI inflation reading comes after the Labor Department reported last week that U.S. wages grew 4.8% year-over-year in November. Unfortunately, the latest inflation numbers suggest prices are rising faster than wages for many Americans.

Voices From The Street: Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, said November’s CPI reading is “a shocking number” and a sign that rising inflation is going to force the Fed’s hand.

“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 (i.e., outright selling of bonds that they’ve already purchased) or interest rate hikes, in order to combat inflation,” Zaccarelli said.

Anu Gaggar, Global Investment Strategist for Commonwealth Financial Network, said the November CPI number will reinforce the Fed’s likely decision to accelerate its tapering process.

“With the strength in the economic recovery, it is time to take the crutches away,” Gaggar said.

George Ball, chairman of Sanders Morris Harris, said the market was already anticipating extremely high inflation numbers, so Friday’s reading was no surprise.

“Friday's elevated inflation reading means that overweighting a portfolio to technology stocks will be an increasingly bad idea, as the Federal Reserve may be forced to tighten policy faster-than-expected to offset inflation and a higher interest rate environment tends to make tech stocks less attractive,” he said.