The White House welcomed new economic data released Wednesday showing year-on-year inflation hit its lowest level in more than three years in July, the latest sign that the worst price surge in four decades is fading and the Federal Reserve will cut interest rates in September.
The Labor Department’s report Wednesday showed consumer prices rose just 0.2% from June to July after falling slightly in the previous month. Measured from a year earlier, prices rose 2.9%, down from 3% in June. That was the smallest gain since March 2021.
Speaking to reporters, Council of Economic Advisers Chairman Jared Bernstein said the U.S. is “moving in the right direction on inflation and doing so with momentum.” But he acknowledged that “while the trends look good, our work is far from done.”
The ongoing slowdown in inflation could weigh on the presidential campaign, as former President Donald Trump has highlighted rampant inflation as a major failure of the Biden administration and its energy policies. Vice President Kamala Harris said she would soon unveil new proposals to “bring down costs and also strengthen the economy as a whole.”
The government said almost all of July’s inflation reflected rising rents and other housing costs, a trend that, according to real-time data, is easing. As a result, housing costs will rise more slowly in the coming months, contributing to lower inflation.
Describing the gap many American voters feel about the economy, Bernstein acknowledged that “too many prices are still too high.” But he asserted: “I have three words for people who feel the way you just said, and they are ‘we hear you.’”
Federal Reserve Chairman Jerome Powell has said he is looking for more evidence of slowing inflation before his institution begins lowering its key interest rate. Economists widely expect the Federal Reserve’s first rate cut to come in mid-September, followed by additional rate cuts in November and December. Investors are betting that at least one of those cuts will be a half-point, according to futures pricing. (ab/lt)
