Inflation stubbornly unsettles Biden ahead of midterm elections
Inflation was persistent in September in the United States, despite the already strong measures taken to slow it down, complicating the task of Joe Biden who, one month before the midterm elections , recently admitted the possibility of a recession.
Prices rose 8.2% in September year-on-year, according to the CPI index — which benchmarks — released Thursday by the Labor Department. This represents a very slight slowdown in inflation, as in August prices rose by 8.3% year on year.
But it is above all the increase in prices over just one month that shows that inflation is tenacious: it accelerated again, with +0.4% between August and September, against +0.1% between July and August. And that's more than the 0.3% rise that was expected by analysts.
September's CPI “shows some progress in tackling higher prices, although we have more work,” President Joe Biden said in a statement.
These US inflation numbers sent the yen down to its lowest since 1990 and depressed Wall Street, which opened sharply lower on Thursday morning before turning green.
Housing rentals, l fuel and medical care were the main drivers of the rise, the Labor Department detailed.
Gasoline prices at the pump, however, fell 4.9%, after their rise linked to the war in Ukraine. But natural gas and electricity cost more than in August.
Joe Biden announced Thursday afternoon that he would make decisions “next week” on the price of gasoline, which remains “too high”.
His Minister of Economy and Finance Janet Yellen welcomed “favorable indicators on easing supply chain bottlenecks and easing pressures in the labor market,” but noted the need to “see sustained progress.”
“Reducing inflation remains the president's number one economic priority,” assured the Treasury Secretary, during a meeting with European officials as part of the IMF meetings in Washington.
Inflation “remains stubbornly high”, commented Kathy Bostjancic, economist for Oxford Economics, with “a continued widespread spike in the prices of basic services” , other than food and gasoline.
Indeed, so-called core inflation, which excludes the volatile food and energy sectors, remained stable over one month, at 0.6%, but reached its strongest rise over one year in 40 years, at 6.6%.
This rise in the cost of living for American households is a strong argument used by Joe Biden's opponents, one month before the mid-term elections giving rise to the renewal of some of the elected members of the Congress. The slim majority of the presidential camp is at stake.
Joe Biden admitted on Tuesday that it was “possible” that the United States would experience “a very slight recession”.
Because the fight against inflation involves slowing down economic activity. This is what the American central bank (Fed) is trying to do, but the longer inflation persists, the harder the institution must strike, at the risk of causing a recession.
Fed officials believe that a period of weaker growth and a slowdown in the job market will be necessary to overcome this inflation, which they consider to be at an “unacceptable” level, according to the minutes of their meeting. September, published Wednesday.
They noted that inflation had “not yet responded” to the rate hikes intended to curb it, and some had judged that acting too timidly would be more costly than take firm action”.
U.S. inflation has slowed, however, since peaking in June, when prices soared by 9.1% over one year, their biggest increase since December 1981.
American retirement and disability pensions, indexed to the CPI, will thus experience, from January, in turn their strongest revaluation since 1981, announced, also Thursday, the American administration of social security. Their index was raised by 8.7%, an average increase in payments of more than $140 per month.
Globally, the fight against high inflation, which affects even more poor and developing countries than developed countries, is now the priority of policy makers.
The effects of the war in Ukraine on energy and food have added to the disruption supply chain related to Covid-19.
The International Monetary Fund (IMF) on Tuesday revised upwards its headline inflation forecasts for 2022 and 2023, and now expects 8.8 respectively % and 6.5%. And he warned that the recession could affect several developed countries in 2023.