The White House is trying to find the silver lining in a tough inflation report



CNN

The White House tried to put a positive spin on another rough economic report on Thursday, saying there are indicators of progress in recently released inflation numbers – although the Federal Reserve is expected to respond by aggressively raising interest rates again.

The September Consumer Price Index report, which measures changes in prices for a range of consumer goods and services, released on Thursday showed that US consumers continue to be hit by higher prices despite unprecedented interest rate hikes by the Fed in recent months aimed at to cool the market.

Data from the Bureau of Labor Statistics showed that annual inflation rose 8.2% in September, a slower increase than the 8.3% increase in August. Economists had forecast the pace of price increases to slow to 8.1% last month. On a monthly basis, overall consumer prices rose by 0.4% from August.

While in California on Thursday, Biden acknowledged that Americans are feeling the pain, pointing out that inflation over the past three months has averaged 2% – down from 11% in the quarter before that.

“It’s progress,” Biden said, later acknowledging that “Americans are being squeezed by the cost of living. That’s been true for years, and people don’t need to read the report to tell them they’re being squeezed. To fight this battle every today is a major reason why I ran for President of the United States.”

He also said the current struggles are a global phenomenon and not driven by more Americans earning higher wages.

Earlier Thursday, Biden received a briefing from his economic team and asked them to keep him updated as conditions develop. His economic team, a White House statement said, “reported that the United States remains in a strong position to bring down inflation and maintain a robust labor market,” and that the president’s economic plan positions the U.S. economy “for stronger growth and investment .”

The attempt to find a bottom in the new inflation numbers highlights an ongoing and pressing policy problem for President Joe Biden and his administration: Addressing Americans’ economic fears and mitigating the potential fallout from next month’s midterm elections.

The stock market initially rebounded on the report — Dow futures fell more than 400 points, or 1.5%, after the report was released, S&P 500 futures fell 1.8% and Nasdaq futures were 2.6% lower — but the market was roared back on the recent morning trade.

As they have been for months, administration officials are expected to continue to emphasize Biden’s commitment to lowering prices in part by pointing to some of the Democrats’ recent legislative achievements — such as the passage of the Inflation Reduction Act — that the White House claims will ultimately, help tackle inflation.

Inflation eased in recent months, mainly due to falling energy prices. The average price of a gallon of gas fell for 98 straight days this summer to $3.68 from a record high of just over $5. But prices have been creeping higher for nearly a month, rising to $3.91 per barrel. gallon, according to AAA. Meanwhile, the prices of food, shelter and others have risen with no end in sight.

For the White House, the new data exacerbates a twin-pronged problem that has plagued the administration for months. With less than a month to go before Election Day, the administration’s failure to secure a clear trend toward slowing inflation — quietly seen as their primary goal leading up to the vote — underscores the political vulnerability Democrats face on an issue that polls record after opinion poll as top of mind for voters.

The economy and inflation remain critical issues for voters just weeks into the midterms. A new CNN poll by SSRS found that 90% of all registered voters said the economy is extremely or very important in deciding their vote on who to send to Congress, and 84% of voters said the same on the question about inflation.

Overall, however, the numbers serve only as the latest data point that the market views as likely to drive the continued – and unprecedented in recent history – aggressive rate hikes by the Fed.

While Biden and his team have publicly given the central bank room to make its policy decisions without political interference, there is a keen awareness that the rapid pace of rate hikes makes it more likely that the moves will tip the US into recession. That would likely have the effect of undoing some of the clear gains officials point to for lower- and middle-income Americans due to Biden’s big legislative victories.

A number of industry leaders and economic experts are warning of the possibility of a recession in the coming months, but Biden has publicly insisted that he does not believe there will be a recession, saying this week: “I don’t think there will be a recession.”

“If it is, it’s going to be a very small recession. That is, we’re moving down a little bit,” Biden told Jake Tapper Tuesday in an exclusive interview on “CNN Tonight.” “It’s possible. Look, it’s possible. I don’t expect it.”

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