The cost of goods and services in the US continued to go up in September, and though the rate of price increases is starting to temper, high inflation persists as the midterm elections in November approach.
The consumer price index (CPI), released by the Bureau of Labor Statistics, showed on Thursday that prices in September were 8.2% higher compared to prices in September 2021. The figure is another decline in the inflation rate seen during the three months since June, when the rate peaked at 9.1%, the highest in more than 40 years.
Although the inflation rate has been coming down, its pace has slowed. July and August saw rates of 8.5% and 8.3%, meaning the rate has budged just 0.3% over the last two months.
The core inflation rate, which excludes the volatile energy and food sectors, was 6.6% over 12 months, the highest increase since 1982.
While the overall inflation rate looks at the increase in prices over a 12-month period, the cost of goods and services has been increasing on a month-by-month basis. Prices in September rose 0.4% compared with prices in August, which itself saw a 0.1% increase compared to July.
Housing and food were the top contributors to this monthly outlook. In both August and September, the price of shelter rose 0.7% while the cost of food rose 0.8%.
The stabilization of overall inflation can contribute to lowering gas prices. The national average per gallon of regular gas is $3.91, according to AAA, compared with over $5 a gallon in June. The price of gas saw a 4.9% drop in September compared with August.
The price of used cars and trucks, once a driver of the increasing inflation rate, is also falling, decreasing 1.1% in September compared to August.
The stubbornness of the inflation rate will probably bolster Federal Reserve officials to continue their hawkish increases of interest rates. Last month, the central bank increased rates by 0.75 of a percentage point, bringing the rate up to 3% to 3.25%, making mortgages, loans and credit card debt more expensive for Americans.
The Fed chair, Jerome Powell, has indicated further increases to interest rates are likely as inflation remains high. According to the minutes of their September meeting, released on Wednesday, Federal Reserve officials, including Powell, agreed that inflation “remained unacceptably high” and that prices were coming down more slowly than officials had expected.
A further increase in the interest rate could come as soon as early November, when the Fed’s board will have its next meeting.
At their September meeting, officials discussed a list of factors that would probably keep inflation high, including “labor tensions, a new round of global energy price increases, further disruptions in supply chains and a larger-than-expected pass-through of wage increases into price increases”.
“We have to get inflation behind us. I wish there was a painless way to do that,” Powell said when the Fed increased interest rates in September. “There isn’t.”
Thursday’s report confirms that the Democrats’ battle to keep their House and Senate majorities during next month’s midterm elections will probably be a referendum on inflation.
Multiple polls have shown that voters’ top concern heading into the election is the economy. Democrats have spent the last few weeks trying to promote their efforts to improve the economy like their passage of the Inflation Reduction Act in August that included investments in climate initiatives and provisions to lower the cost of healthcare.
Joe Biden has taken to pointing to low unemployment, which stood at 3.5% in September, as a sign of a strong labor market in the face of rising prices.
On Thursday, in a statement that noted inflation was his “top priority”, the president said: “Because of my economic plan, the United States is in a stronger position than any major economy to take on this challenge. My policies – that Democrats delivered – directly tackles price pressures we saw in today’s report, like healthcare.”
Republicans have continued to use inflation as their main talking line to voters, claiming that irresponsible spending from the Democrats has led to higher prices.
“Thanks to extremists in Washington and their reckless spending, inflation is at a 40-year high,” Mehmet Oz, the celebrity doctor running for US Senate in Pennsylvania, tweeted on Thursday. “Pennsylvania families can’t afford [the Democrat] John Fetterman in the Senate.”
Countries around the world have been seeing record inflation in the midst of the recovery from the Covid pandemic. On Tuesday, the International Monetary Fund told central banks to “stay the course” in the fight against inflation despite concerns over a global recession, saying the “worst was yet to come” as price pressures continue.