Inflation in the US rose to a 17-year high of 4.1 per cent over 2007, pushed up by food and energy prices.
The data from the US Labor Department reveals energy prices rose 17.4 per cent and food was up 4.9 per cent over the course of last year.
The 4.1 per cent rise in the consumer price index (CPI) compares with a 2.5 per cent rise in 2006.
Transport costs rose 8.3 per cent as petrol prices increased and housing costs were up three per cent.
Without food and energy price rises, US inflation for 2007 stood at 2.4 per cent.
In December prices rose 0.3 per cent, down from the 0.8 per cent inflation increase recorded in November.
The rise in inflation will put more pressure on the US economy as fears of a recession increase.
Yesterday, a $10 billion (£5 billion) loss recorded by Citigroup coupled with poor retail results for December saw share prices on Wall Street, and other markets around the world, fall noticeably.
The rising inflation also raises questions over whether the Federal Reserve will be able to cut interest rates in coming months in a bid to kick start the US economy.
Further bad news came from earnings data as wages increased faster than prices in December, creating further inflationary pressures on the US economy, and unemployment levels increased by 474,000 to 7.7 million.