U.S. consumer prices are expected to grow at their fastest pace in nearly 40 years in December as the Federal Reserve worries about the threat of rising inflation and its impact on the economic recovery.

The consumer price index (CPI) was estimated to have risen at an annual rate of 7% last month, up from 6.8% in November, according to consensus forecasts compiled by Bloomberg.

However, month-on-month price growth between November and December is expected to slow to 0.4%, down from 0.8% in the previous period. Data will be released Wednesday at 8:30 am ET.

“Core” inflation, which strips out volatile items such as food and energy, is expected to accelerate more than the last reading. Economists predict the core CPI will jump to 5.4%, well above the previous annual rate of 4.9%. That means another 0.5% per month.

The new data comes a day after Federal Reserve Chairman Jay Powell warned that high inflation is “serious threat“The recovery in the labor market affirms the central bank’s intention to rapidly reduce monetary policy support.

Senior officials have already begun developing plans to raise interest rates from near zero once the twin goals of maximum employment and an average 2 percent inflation rate are reached.

The December data is expected to further show that inflation is rising in the wider economy and that the risks are more entrenched.

Inflation data for December is expected to put pressure on the Biden administration’s management of the economy ahead of the 2022 midterm elections. While the U.S. president’s booming economy created more than 6 million jobs last year and the unemployment rate fell to 3.9 percent, soaring prices and supply chain disruptions have dampened views of a strong recovery.

“This is obviously a really challenging area . . . Americans are feeling the squeeze on prices,” a senior White House official told the Financial Times. “While forecasts are expected to be moderate [of inflation] Throughout the year, both the president and the administration are focused and pushing the process as much as possible. “

The White House has been working to reduce bottlenecks at major ports, crack down on anticompetitive practices in certain markets such as the meat industry, and encourage increased global oil production to lower gasoline prices. However, it has not taken other anti-inflationary measures, such as removing tariffs on Chinese imports.

Combined with recent progress in the job market – unemployment has plummeted below 4% and wage growth has picked up amid a near-record worker shortage – economists are now expected The Fed will raise rates in March and make two or three more adjustments later this year.

The Fed also expressed willingness to start reduce By sometime in 2022, its $9 trillion balance sheet will no longer reinvest the proceeds of its maturing Treasury and agency mortgage-backed securities.

Powell said Tuesday that the process, known as “runoff,” could happen “faster and faster” than the last time the Fed tried to shrink its portfolio in 2017.

There is no firm plan for when the balance sheet might start to shrink and how quickly the Fed can act.

On Tuesday, Atlanta Fed President Rafael Bostic Say He supports the balance sheet shrinking by at least $100 billion a month after the first expected rate hike in March. He said at least two more rate adjustments would be appropriate by 2022.