And no, of course he didn't do it. But he was able to get things put in place that made a nice steep drop in inflation far more likely to happen than anything any Republican would've done - especially that jackass Trump.
Thanks, Joe. Ya done good.
Inflation hits lowest level since spring 2021, most likely teeing up rate cuts
Federal Reserve officials have said they won’t trim borrowing costs until they’re confident that prices are easing back to normal.
Updated August 14, 2024 at 10:15 a.m. EDT|Published August 14, 2024 at 7:39 a.m. EDT
Inflation dropped in July to its lowest level in three years on an annual basis, setting up the Federal Reserve to cut interest rates soon to take pressure off the economy.
The snapshot was the clearest indication yet that inflation is heading back to normal levels from 40-year highs — without a recession. Central bankers won’t be caught celebrating, scarred by years of unexpected twists that repeatedly upended the Fed’s inflation fight. But officials will close out the summer with the surest sense yet that it’s time to loosen up on the economic brakes, possibly starting next month.
That would mean some breathing room for households and businesses trying to get mortgages or auto loans, or grow their businesses. For two years, high interest rates have been an added strain for those also struggling under the weight of high prices, especially for basics like food and gas. Now, more relief is in sight — even though the run-up in inflation means prices are still significantly higher now than they were just a few years ago.
“This is pretty much in line with what the Fed expected, and hoped,” said Douglas Holtz-Eakin, president of the conservative American Action Forum. “I had always felt the [Fed’s] language had pretty much locked them into a rate cut in September. This essentially guarantees it, unless we get something really bizarre.”
Data from the Bureau of Labor Statistics showed July’s annual inflation rate hit 2.9 percent, dipping below 3 percent for the first time since March 2021, when price increases took off on the heels of the pandemic. A core measure that strips out volatile categories such as food and energy also saw the smallest 12-month increase since April 2021.
Markets rose slightly off the news, but were mixed by midmorning.
For months, Fed officials have said they won’t trim borrowing costs until they’re confident inflation is easing to normal levels. Now that they’ve come about as close as possible, officials are increasingly acknowledging the risks of keeping rates too high for too long. Already, hiring has slowed down, and global markets are jittery over whether the Fed might have put too much pressure on the economy overall.
Housing continued to dominate the inflation snapshot, with shelter costs accounting for nearly 90 percent of the monthly increase. Rent costs have been cooling for some time now, but economists are still puzzled about why that shift didn’t show up in official statistics until this summer. July saw a slight backpedal, with a key rent gauge rising a smidgen more than in previous months. (The widespread expectation is inflation won’t come down all the way to normal until there’s major headway on the housing component.)
Energy costs stayed level after a few months of declines. Indexes for car insurance and household furnishings were also up. Meanwhile, costs for used cars and trucks, medical care, airline fares and apparel dropped in July compared to June.
In the meantime, families and households are feeling long-awaited relief from price increases, especially on key budget items such as food and housing. Gas costs are down compared with last year.
In the backdrop, Republicans and Democrats are crisscrossing the country trying to attract voters to their economic agendas. Inflation routinely polls as a top reason many Americans don’t think the economy is working for them, even while other metrics such as the job market and consumer spending remain strong. GOP presidential nominee Donald Trump often slams Democrats for massive spending during the pandemic that helped supercharge inflation. Meanwhile, Vice President Kamala Harris, the Democratic nominee, argues that her proposals would help the middle class and that Trump’s plans for mass deportations and spiked tariffs would make inflation worse.
Jared Bernstein, chair of the White House’s Council of Economic Advisers, hailed the “solid disinflation” as good news. But in an interview with The Washington Post, he said the administration is keeping its focus on ways to relieve everyday costs for rent, prescription drugs and more.
“We’re very happy to see lower inflation, to see it have some momentum,” Bernstein said. “But that’s not going to stop us from continuing to lower costs wherever we can.”
The Fed has made major progress on its inflation fight since prices took off in 2021. Since then, officials hoisted the benchmark interest rate to the highest level in more than two decades, in an aggressive attempt to slow the economy at any cost. The result has turned out better than just about anyone predicted, with robust growth, low unemployment and rising wages accompanying cooling inflation. (The Fed wants inflation to hit a 2 percent target each year, but that’s using a different inflation gauge from the one released Wednesday. That gauge rose 2.5 percent in June on an annual basis. Officials have said they won’t wait until inflation gets all the way down to 2 percent before they start cutting rates. Still, they routinely say 2 percent is the ultimate goal.)
The fear, though, is that the economy will begin to crack under the continued weight of high rates. A weaker-than-expected July jobs report stoked fears of a downturn, with that anxiety quickly rippling through the financial markets over a dicey day of trading last week. And even though the job market isn’t being gripped by widespread layoffs and the markets quickly stabilized, the recent panic has put a spotlight on the Fed, which decided to hold rates steady last month instead of starting to cut. With no meeting in August, some observers wondered if the Fed should have lowered rates in July.
Ultimately, the answer will lie in the data.
“You can see inside the data it’s a good report,” said Joe Brusuelas, chief economist at RSM. “It’s just not where we would have wanted to see it to say, ‘all clear.’”
The overwhelming forecast is that the Fed will announce a rate cut at its next meeting in September, possibly by a larger half-point cut if policymakers think the economy is slowing too much. Analysts also expect that the Fed — playing a bit of catch-up — will cut at the year’s remaining meetings in November and December, too. (A November cut would be notable because that meeting falls the week of the presidential election, when the central bank would otherwise avoid anything that affects politics at all costs.)
Fed leaders have made clear that no decisions are set in stone, and depend entirely on the data. But it’s clear that leaders are more confident in their progress against inflation than at any time over the past few years.
Speaking at a news conference in late July, Powell said the recent string of encouraging reports was even better than how things looked in late 2023. Last year, much of the fall in inflation came from a rapid decline in goods prices, as people pulled back on all of the couches, treadmills and home office equipment they had bought during the pandemic. Now, Powell said, there’s a “broader disinflation” taking hold.
“This is so much better than where we were even a year ago,” Powell said. “It’s a lot better. The job is not done, I want to stress that, and we’re committed to getting inflation sustainably under 2 percent. But we need to take note of that progress.”
Still, that progress looks different across the economy. Speaking to The Post this month, Chicago Fed President Austan Goolsbee said that when he travels across his district — which includes Iowa and most of Illinois, Indiana, Michigan and Wisconsin — businesses say supply chain issues from the pandemic have largely cleared. But many companies are still frustrated that they can’t pass their rising operating costs on to customers, because people are already so sensitive to more price increases.
Goolsbee also said there’s a disconnect between wages for low-income Americans rising faster than inflation — and the reality of high costs for the basics.
“Low-income people are getting squeezed in every way,” Goolsbee said.
