Is inflation finally slowing in the United States?
Inflation data, due to be released on Wednesday, is expected to show at least a partial slowdown in consumer prices, giving US President Joe Biden a breath of fresh air just months before the crucial midterm elections.
Fueled by aggressive consumer spending on pandemic savings, global supply chain crunches, domestic worker shortages and Russia’s war on Ukraine, inflation hit 9.1 percent year on year in June, the highest in 40 years.
According to MarketWatch, however, it is expected to fall to 8.6 percent in July.
White House spokeswoman Karine Jean-Pierre said while the administration has yet to see the new statistics, “we know gas prices have fallen.”
“And we hope that these gas price declines will feed into the CPI inflation data,” Jean-Pierre told reporters on Tuesday.
Consumer prices have continued to rise in the United States, squeezing family budgets and, in turn, Biden’s popularity.
Opponents accuse Biden of accelerating inflation with his gargantuan $1.9 trillion coronavirus aid package, which he enacted in March last year, shortly after taking office.
And Republicans renewed their criticism of Biden’s economic policies, saying passing his massive climate and health bill, dubbed the Inflation Reduction Act, in the Senate on Sunday does the opposite of its stated purpose.
– bigger problem –
But the devil is in the details.
Experts fear that the slowdown in inflation linked to the drop in gasoline prices could be outweighed by rising rental and house prices.
“The bigger problem is what happens to home ownership costs and rents,” wrote Diane Swonk, chief economist at KPMG, on Twitter.
Similar to other economists, Swonk expects the so-called underlying inflation rate, which excludes food and energy, to rise year-on-year, which rose to 5.9 percent in June.
Washington now faces the question of whether it will be able to bring inflation down on a sustained basis without plunging the world’s largest economy into recession after two quarters of economic contraction.
The US Federal Reserve has already raised interest rates four times to a range of 2.25 to 2.5 percent in order to curb inflation.
On the plus side, the US job market remains dynamic and in July the unemployment rate fell to pre-pandemic levels of 3.5 percent.
But there are still almost two vacancies for every available worker, pushing up wages and contributing to inflation.
Inflation data will be released on Wednesday at 8:30 a.m. local time (1230 GMT).
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