- Oops!Something went wrong.Please try again later.
(Bloomberg) -- President Joe Biden sought to downplay a report showing higher-than-expected inflation in June, calling it “out of date” because of declining US gasoline prices.
Most Read from Bloomberg
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.”
“Those savings are providing important breathing room for American families,” Biden said in the statement, issued about one hour after the Labor Department’s report on consumer prices. However, the report showed broad advances in prices across the economy, particularly in housing and food.
The consumer price index rose 9.1% from one year earlier, according to new Labor Department data, the largest increase consumers have seen since the end of 1981. The jump exceeded economists’ estimates for the fourth month in a row.
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.
Read more: Gasoline Prices at Record Added Pain to Hot US June CPI Report
Accelerating inflation poses an enormous political challenge to Biden and his party as voters cement their choices ahead of midterm elections in November. Democrats stand to lose control of Congress over voter anger about unrelenting price increases, especially as Biden’s efforts to increase the supply of oil and curb shipping and other costs continue to yield few results.
The unexpected increase in the pace of inflation also raises pressure on the Federal Reserve to further increase interest rates, even at the risk of sparking a recession. The central bank is expected to raise rates another 75 basis points later this month, and talk is growing that a full point hike could be on the table.
Republicans have blamed inflation on the $1.9 trillion pandemic relief measure Biden signed into law shortly after taking office. Economists disagree on the extent to which the law fueled price increases, pointing more often to enduring supply-chain disruptions caused by the pandemic and labor shortages.
“Today’s consumer price inflation reading of 9.1 percent is a painful reminder that Americans’ paychecks continue to be strained by the high inflation that was fueled by Democrats’ untargeted and partisan spending spree,” Senator Mike Crapo of Idaho, the senior Republican on the tax-writing Finance Committee, said in a statement.
One administration official said the report wasn’t surprising, given gasoline prices in June, but said it was disappointing that housing prices in particular continue to abnormally escalate.
Prices for rental housing, which accounts for roughly one-third of the inflation reading, have risen at an annual rate of 8.2% in the past three months. The trend is considered especially worrying because rents don’t reverse course as quickly as food or gas prices.
Cecilia Rouse, chair of Biden’s Council of Economic Advisers, said in an interview with Bloomberg Television that the report should spur Congress to pass Biden’s economic policies, including measures intended to cut prices for drugs and energy. Asked whether the US is already in a recession, she said indicators tracked by the National Bureau of Economic Research -- the independent organization which calls the timing of a recession -- remain robust.
Rouse said Biden understands and respects the independence of the Fed, but wouldn’t comment on the central bank’s actions.
“We will really be hoping the Federal Reserve can pull off this soft landing,” she said.
Middle East Trip
Biden’s statement on the monthly consumer price index report was issued as he begins a trip to the Middle East intended primarily to persuade Saudi Arabia and other OPEC+ nations to increase their oil production.
Average US gas prices in July are down 12% over the average price in June. But they are still up more than 47% from a year ago. Biden has blamed the war in Ukraine for much of the increase, noting a surge in gasoline prices after Russia’s invasion in February.
In addition to noting the backward-looking nature of the report, Biden pointed to signs that core inflation, which excludes food and energy, may be moderating.
“Importantly, today’s report shows that what economists call annual ‘core inflation’ came down for the third month in a row, and is the first month since last year where the annual ‘core’ inflation rate is below six percent,” he said.
But the June data showed that the core measure of CPI increased by 0.7% from May, the biggest monthly gain in a year. On a yearly basis, it did decelerate as Biden indicated, reflecting a surge in prices a year ago that dampens the annual measure.
(Updates with administration official reaction beginning in seventh paragraph)
Most Read from Bloomberg Businessweek
©2022 Bloomberg L.P.