The United States’ Labor Department has announced that inflation has hit another record high level since 1981, rising 8.5 percent over the year to the end of March as the conflict in Ukraine drives up energy costs for average households.

The latest Consumer Price Index (CPI), which measures the prices of a basket of goods and services, comes after the prices rose by 7.9 percent in the year through February.

That means America is witnessing the fastest pace of annual inflation in 40 years. 

To put that into perspective, the rise in prices of goods and services is now at levels not seen in the U.S. since Ronald Reagan took over the Presidency of Jimmy Carter.

Amid rising energy prices as a result of the Ukraine conflict; continuing supply chain problems and soaring demand are other factors weighing in. 

The price increases are quite wide with the cost of rent, gas, and food causing the most hardship for lower and poorer class American households who are being affected the most.

Motorists at the gas pumps are facing soaring prices, which was the biggest component of the latest price rises. The gasoline index rose 18.3 percent in March and accounted for more than half of all the items’ monthly increase. 

According to the American Automobile Association (AAA), nationally the average price of a gallon of gas is now $4.11, compared with $2.86 a year ago.

The crisis in Ukraine which many have accused the U.S.-led NATO military alliance of instigating has rocked energy prices after Washington and its Western allies banned all Russian gas and oil supplies. 

Then comes the food index which rose another one percent in March compared with February, and is up 8.8 percent compared with the prior 12 months. 

Chicken parts rose 15.1 percent, citrus fruits, including lemons, limes, and grapefruits, climbed 19.5 percent. The prices for oranges and tangerines rose 18.3 percent.

The price of rice rose an extra 3.2 percent from February to March, while canned fruit and vegetable prices rose 3.8 percent, potatoes 3.2 percent, and ground beef 2.1 percent.

Experts say the latest figures will be a major setback for the administration of U.S. President Joe Biden. 

The Biden White House has already lost popularity and Democrats are widely expected to face a very touch challenge in trying to retain control of Congress in November’s midterm elections.

Earlier this week, the White House tried to cushion the blow by issuing a warning ahead of the March data release saying it was expecting a bad set of figures. 

Biden even deflected the blame for America’s economic mess on the Russian President Vladimir Putin saying “I am doing everything in within my executive power to bring down the Putin price hike.”

Last year critics denounced Biden’s “Build Back Better” plan to fix the economy saying it would have imposed the largest tax increase in over 50 years. 

Some Democrat Senators joined Republicans to reject the bill but despite the heavy blow, the U.S. President is refusing to abandon his tax agenda. 

Biden’s latest proposal to tackle inflation includes the same tax hikes he proposed last year. Analysts say the plan is a path toward higher inflation and an economic recession.

Biden claims his tax increases are aimed at corporations and millionaires, but critics say they would in fact hurt American workers, families, and job creators during a time of economic uncertainty. 

Even Senator Bernie Sanders has questioned how Biden’s plans will benefit the poor and not millionaires. 

Expert economists believe the latest inflation figures are likely to strengthen the Federal Reserve’s resolve to increase interest rates as it struggles to control inflation levels.

However, history shows that doesn’t exactly fix the problem.

With higher interest rates there also comes a negative impact on the stock market. Rises in the Fed rates make borrowing money in the market more expensive and the cost of doing business rises for public and private companies; which in turn results in layoffs and and higher unemployment rate across the county. 

Adding to the economic hardship, Americans are not even receiving their tax refunds on time at a time when inflation is hurting family budgets.

Observers are arguing it is important that Americans at least receive their own money back on time to ease their financial problems. 

The Internal Revenue Service says it is still backlogged after extensive pandemic delays and does not expect to finish processing the returns until the end of the year. 

But can Americans afford to wait months to receive their own money back from their government? 

Analysts say this can be easily fixed by all federal employees returning to the office; many of whom are still working from home. 

According to the Ludwig Institute for Shared Economic Prosperity, Inflation-adjusted earnings for the first quarter of 2022 show that American workers are losing ground, forcing a larger percent of the workforce out of a living-wage job status for the month of March and into the ranks of the "functionally unemployed.”

The Think Tank says "being forced to make decisions between food and shelter versus healthcare and education is not a sustainable long-term situation for a healthy society."

Meanwhile, in Europe, prices in the eurozone have risen 7.5 percent in March from a year earlier.

Again it’s a surge Europeans have not seen in four decades and it far exceeds the central bank’s target of 2 percent. 

Like America, inflation is being fueled by energy prices, which soared 45 percent last month from a year earlier. 

According to the President of the European Central Bank Christine Lagarde, energy prices are expected to remain high in the near term and then “moderate to some extent.”

Food prices are also rising sharply because of higher transportation costs and the elevated price of fertilizer, of which Russia is a top producer. 

The European Central Bank says overall, price increases are becoming more widespread.

The bank is literally stuck between a rock and hard place. On the one hand, high inflation means it has the space to withdraw stimulus measures. But the worsening economic growth outlook means there are major risks to tighten monetary policy. 

If the Central Bank raises interest rates it could cool the economy too much when economic growth is already slowing and pointing towards a recession.

It’s a similar dilemma facing the Fed in the U.S. and also similar to America, the European Central Bank says the conflict in Ukraine is “weighing heavily on the confidence of businesses and consumers.”

Trade disruptions are leading to new shortages of materials, and surging energy and commodity prices are holding back production, it added. 

Lagarde says “while risks relating to the pandemic have declined, the war may have an even stronger effect on economic sentiment.”

Concerns about the future of the economy are particularly stark in Germany, Europe’s largest economy, because of its heavy reliance on Russian energy.

Late last month, economic advisers to the German government said the outlook had “worsened sharply” because of the war, with a growing risk of recession along with higher inflation rates.

Outside the Eurozone, the UK is also facing similar crises, related to higher inflation, especially oil prices. 

It’s a very bleak economic outlook for the West with concerns about skyrocketing gas prices across the U.S. and Europe becoming a major worry for Americans and Europeans this year.

How do you replace Russian gas? helping in the efforts to find a peaceful solution to the war in Ukraine is a good first step. 

Lifting sanctions on major oil-producing countries is a close second.