Is inflation finally slowing down in the United States?
Inflation data due out on Wednesday is expected to show at least a partial cooling in consumer prices and provide a breath of fresh air for US President Joe Biden a few months ahead of the crucial midterm elections.
Fueled by aggressive pandemic savings consumer spending, global supply chain grunts, domestic worker shortages and Russia’s war on Ukraine, inflation hit 9.1% in June, year on year, the highest in 40 years.
But it is expected to fall to 8.6% in July, according to MarketWatch.
White House spokeswoman Karine Jean-Pierre said that while the administration has yet to see the new statistics, “we know gasoline prices have fallen.”
“And we hope that these declines in gasoline prices will be reflected in the CPI inflation data,” Jean-Pierre told reporters on Tuesday.
Consumer prices have continued to climb in the United States, squeezing family budgets and, by extension, Biden’s popularity.
His opponents accuse Biden of precipitating inflation with his mammoth $1.9 trillion coronavirus relief package, which he signed into law in March last year, shortly after taking office.
And Republicans have renewed their criticism of Biden’s economic policies, saying Sunday’s Senate passage of his massive climate and health care bill titled the “Cutting Inflation Act” makes the contrary to its stated purpose.
But the devil is in the details.
Experts fear that the slowdown in inflation linked to lower gasoline prices will be offset by rising rent and property prices.
“The bigger issue is what happens to property costs and rents,” Diane Swonk, chief economist for KPMG, wrote on Twitter.
Similar to other economists, Swonk expects to see an increase in the so-called core inflation rate that excludes food and energy, which had risen to 5.9% in June, by a year. on the other.
The question that now arises in Washington is whether it will be possible to bring down inflation sustainably, without plunging the world’s largest economy into recession, after two quarters of economic contraction.
In an effort to curb inflation, the US Federal Reserve has already raised the interest rate four times to a range of 2.25 to 2.5%.
On the positive side, the US labor market remains buoyant and in July the unemployment rate fell to the pre-pandemic level of 3.5%.
But there are still nearly two jobs open for every available worker, driving up wages and contributing to inflation.
Inflation data will be released Wednesday at 8:30 a.m. local time (12:30 p.m. GMT).
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