(Washington) Inflation slowed somewhat in August in the United States thanks to the drop in gasoline prices, but rent and even food prices continue to rise, a thorn in Joe Biden’s side two months after the midterm elections.
Posted at 7:02
Updated at 12:30 p.m
Consumer prices rose 8.3% year on year in August, up from 8.5% in July, according to the CPI index released by the Labor Department on Tuesday. However, inflation remains higher than the 8% expected by analysts.
“It will take more time and willpower to bring inflation down,” Biden said in a statement.
However, the American President welcomed this slowdown, which he says shows “progress”.
The Republican opposition regularly accuses him of having made a significant contribution to this outbreak of inflation through his policies.
The Democratic president will hold a ceremony Tuesday afternoon at the White House in honor of his “Inflation Reduction Act,” the plan to fight climate change and help households deal with medium-term inflation, which he pushed through Congress in August.
Behind this slight slowdown is a continued increase in the cost of living in the United States.
“Inflation remains stubborn,” commented Kathy Bostjancic, chief economist at Oxford Economics, in a statement.
Indeed, over a month, prices started to increase again, by +0.1% compared to July, while a slight decrease was expected and inflation was zero between June and July.
Refueling at the gas station costs significantly less than in July (-10.1%). A welcome change in a country where the car is very often essential and bulky and where petrol prices have skyrocketed since the beginning of the war in Ukraine.
Prices for plane tickets and used cars also fell.
However, that wasn’t enough to offset increases in most other products. Housing, food, medical care, new cars… The increase is “widespread,” explains the Department of Labor in its press release.
Natural gas and electricity prices also continued to rise.
“Ouch. Much bigger (price) increases than expected across a variety of categories,” notes Ian Shepherdson, economist for Pantheon Macroeconomics, in a note.
So-called underlying inflation, which is calculated on all prices except food and energy, thus accelerated to +6.3% over the year (from +5.9% in July) and +0.6% over the month (vs. +0.3% in July). ).
Food prices even recorded the strongest increase since 1979 (+11.4%) over a year.
For the past year and a half, prices in the United States have been rising and eroding household purchasing power. Inflation hit its highest level in more than 40 years in June before slowing in July.
” Hurry up ”
That continued inflation spooked Wall Street Tuesday morning, with the New York Stock Exchange opening significantly lower.
The dollar surged higher as investors revised their expectations for a slowdown in Federal Reserve (Fed) rate hikes.
They’re the ones in charge of the fight against inflation, and this data should really convince them to tighten their monetary policy further with a firm grip.
Raising interest rates prompts commercial banks to raise interest rates on loans offered to individuals and businesses, who are then less inclined to consume and invest, easing the pressure on prices.
“Time is running out,” Fed Chair Jerome Powell warned on Thursday.
However, this deliberate slowdown in economic activity will push up unemployment. But the good shape of the job market, which is even experiencing a shortage of workers, gives them some leeway, despite an unemployment rate that edged up to 3.7% in August.
“Combined with a still-strong labor market, this data seals the deal for another aggressive 0.75 percentage point hike in interest rates next week,” HFE chief economist Rubeela Farooqi said at the Fed meeting.
The CPI index is used to index pensions. The Fed, which aims to bring inflation back to around 2%, favors another measure, the PCE index, whose growth slowed in July (+6.3% over a year).