United States President Joe Biden sought to downplay a report showing higher-than-expected inflation in June, calling it “out of date” because of declining US gasoline prices.
Biden called inflation “unacceptably high” in a statement but said that “today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices that have reduced the price at the pump by about 40 cents since mid-June.”
US consumer prices accelerated in June as gasoline and food costs remained elevated, resulting in the largest annual increase in inflation in 40-1/2 years and cementing the case for the Federal Reserve to hike interest rates by 75 basis points later this month.
The consumer price index jumped 9.1% from a year earlier, the fasted increase since November 1981, the Labor Department reported.
The widely followed inflation gauge increased 1.3% from a month earlier, the most since 2005, reflecting higher gasoline, shelter and food costs.
The average national retail price of gasoline surpassed $5 a gallon for the first time in June before retreating in the past few weeks. On a monthly basis, the spike in energy prices accounted for nearly half of all the overall gains in CPI. The gasoline index surged 11.2% from the prior month, while the annual increase of 60% was the largest since March 1980.
Accelerating inflation is a vexing problem for the Federal Reserve, too. The Fed is already engaged in the fastest series of interest rate hikes in three decades, which it hopes will cool inflation by tamping down borrowing and spending by consumers and businesses.
The U.S. economy shrank in the first three months of the year, and many analysts believe the trend continued in the second quarter.
“The Fed’s rate hikes are doing what they are supposed to do, which is kill off demand,” said Megan Greene, global chief economist at the Kroll Institute. “The trick is if they kill off too much and we get a recession.”
The likelihood of larger rate hikes this year pushed stock indexes lower in afternoon trading. The central bank is expected to raise its key short-term rate later this month by a hefty three-quarters of a point, as it did last month.
White House officials also tried to get ahead of the report on Tuesday, saying the decrease in gas prices is significant. Prices have fallen from $5 a gallon in mid-June to an average of $4.63 nationwide, according to data from AAA.
“That elevated price in June is both out-of-date to where the market is today and out of date to what American consumers, more importantly, are actually experiencing today,” a senior White House official told reporters on the press call.
Polling shows the inflation issue is a problem for Biden, whose approval ratings hit a low of 33% in a New York Times/Siena College poll published this week. The Times said widespread worries about inflation and the economy are contributing.
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