President Joe Biden has made the fight against US inflation his “top priority” after government data showed that it reached a 30-year high last month, underscoring the continuing threat to his presidency and economic recovery.
The sharp rise in the consumer price index (CPI) in the Labor Department’s data released on Wednesday surprised both economists and the White House, and came as Biden heads to Baltimore to promote the $ 1.2 trillion infrastructure review he claims could reverse the trend.
“Inflation is hurting Americans’ pocketbooks, and reversing this trend is a top priority for me,” Biden said after the report was released.
“I travel to Baltimore today to highlight how my infrastructure bill will reduce these costs, reduce these bottlenecks and make goods more accessible and cheaper.”
Inflation had remained subdued in recent years, but roared back with revenge this year as US companies began resuming normal operations using Covid-19 vaccines.
Prices were squeezed by high demand from consumers who were flushed with cash combined with a shortage of American workers and stingy in supply chains around the world that slowed the supply of key components such as semiconductors, which are crucial for manufacturing cars and electronic devices.
Although Biden has claimed that the increases will prove to be temporary, they have given his opponents a powerful counter-argument to the spending plans he has invested his presidency in when his approval rating drops.
He won a victory when Congress approved the infrastructure review last week, but the $ 1.85 trillion Build Back Better plan to improve social services remains mired in conflict among Biden’s Democrats, who closely control the Legislature.
Democratic Sen. Joe Manchin, who has been protesting against the plan’s costs, tweeted after the CPI report, saying, “By all accounts, the threat of record inflation against the American people is not ‘transient’ but is getting worse.”
– Prices are rising everywhere –
The 6.2 percent increase in the CPI compared to October 2020 was the sharpest annual increase since November 1990, and came as the costs of everything from cars to petrol increased, the Ministry of Labor said.
Compared with September, the CPI rose by 0.9 per cent, more than twice as high as the previous month and above forecasts from economists.
A large part of the increase was seen in energy prices, where petrol rose by 6.1 per cent just last month and heating oil increased by 12.3 per cent.
Biden said he had asked his National Economic Council to look for ways to lower those prices and also told the Federal Trade Commission to crack down on price cuts in the energy market.
Food prices also rose last month, with food at home rising by one per cent, while food from home, such as meals at restaurants, rose by 0.8 per cent.
Americans have been able to resume eating out, but restaurants like other companies across the country have struggled to bring back workers trapped during the pandemic.
Used cars have seen an abnormal rise in prices throughout 2021, which strengthened total inflation. After the decline in August and September, the October report showed that they again pushed up 2.5 percent.
– ‘Will be awful’ –
In the midst of a nationwide housing shortage, housing costs including rent rose, with an increase of 0.5 percent in the shelter category, according to the report.
Food and energy prices are volatile, but even with these factors excluded, the “core” CPI climbed by 0.6 per cent last month compared with the 0.2 per cent increase in September.
Over the past 12 months, it has increased by 4.6 percent, the largest increase since August 1991, according to the report.
“I hate to say this, but the October core KPI is just a taster; the next few months will be awful,” tweeted Ian Shepherdson at Pantheon Macroeconomics.
The rapid price increases also create a problem for the Federal Reserve, which announced that it will start calling back its monthly purchases of bonds and securities designed to help the economy during the pandemic, but said they will be patient before raising interest rates.
Some economists believe that the central bank may need to move more aggressively to limit prices.
Kathy Bostjancic of Oxford Economics warned that inflation could worsen in the coming months before slowing down next year, but if that does not happen, the central bank may need to change quickly.
“Strong demand and limited supply will drive inflation higher in early 2022, which could lead to the Fed raising interest rates earlier than our December 2022 forecast,” she said, adding that it may also be forced to increase the pace of downsizing.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)