US inflation climbed to 7% in December 2021, reaching the highest level since June 1982.
The rise was driven primarily by shelter, used cars and food, with energy falling slightly.
This means that December was the eighth month that inflation year on year had been at 5% or higher.
The news comes following a speech from Federal Reserve chair Jerome Powell yesterday, who warned that inflation could become "entrenched" and said that "the economy no longer or wants the very accommodative policies we have had in place".
Richard Flynn, managing director at Charles Schwab UK, said: "Today's rise in the rate of inflation falls within investors' expectations. It's clear that both the virus and the recent inflation surge have put a big dent in measures of consumer confidence. There are rampant fears of stagflation akin to the 1970s, but the good news for now is that unemployment is not on the rise.
"Based on history, it's not the timing of the first-rate hike that matters, it's the trajectory and speed once rate hikes begin," he added.
Seema Shah, chief strategist at Principal Global Investors, noted that while "7% is no joke," it is possible that "December's number could mark the peak for annual inflation readings".
"Not only are the base effects starting to fall out of the annual comparisons, but there are growing signs of supply strains easing, with freight rates coming down, delivery times shortening, and backlogs reducing," she said. "This should mean that the most acute price pressures start to fall back in coming months, suggesting a more digestible run of CPI readings are in the offing in the coming quarters."
However, she said that for the Fed, "a 7% figure will inevitably make for uncomfortable reading".
"Chair Powell believes that there is no need to rush to get back to neutral, but today's number will increase pressure on the Fed to get monetary policy tightening off the starting block," Shah added.
Jai Malhi, global market strategist at JP Morgan Asset Management (JPMAM), wrote that "the Fed has been focused on two main pillars when considering when to begin easing off the accelerator and applying the brake."
"The first is inflation and the central bank has been convinced for some time that its objective has been met," he explained. "Today's release will emphasise that point.
"The second pillar is the labour market where a rapid recovery in jobs, coupled with a smaller labour force, is giving rise to stronger wages. This means that the goal on employment has likely been reached too."
He added that "an acceptance that the post-pandemic economy looks different to the one before it", combined with a tighter labour market potentially fuelling more sustained inflation, means the Fed will "begin to press the brake this year".
"Bond markets are currently pricing in about a 90% probability that the Fed delivers four rate hikes in 2022 and today's inflation data should not dissuade the central bank from delivering the first of those hikes in March," he reasoned.