consumer prices increased solidly in December as rental accommodation and used cars maintained their strong gains, culminating in the largest annual rise in inflation in nearly four decades, which bolstered expectations that the Federal Reserve will start raising interest rates as early as March.

central bank stood ready to do what was necessary to keep high inflation from becoming "entrenched," in testimony during his nomination hearing before the Senate Banking Committee for a second four-year term as head of the bank.

The high cost of living, the result of snarled supply chains because of the COVID-19 pandemic, is a political nightmare for President Joe Biden, whose approval rating has taken a hit.

In addition to higher rents, consumers also paid more for food, though the 0.5% increase in food prices was less than in the prior three months.

Consumers also got a respite from gasoline prices, which fell 0.5% after rising 6.1% in both November and October.

Rising inflation is also eroding wage gains.

Inflation-adjusted average weekly earnings fell 2.3% on a year-on-year basis in December.

Economists believe the year-on-year CPI rate probably peaked in December or will likely do so by March.

Excluding the volatile food and energy components, the CPI increased 0.6% last month after rising 0.5% in November.

New motor vehicle prices rose 1.0%, marking the ninth consecutive month of gains.

But the cost of motor vehicle insurance fell again as did recreation.

"But inflation for many other goods and services will be higher in 2022 than before the pandemic, due to higher labor costs and input prices