On Wednesday (12th), US President Biden said in response to the just-released US consumer price index (CPI) report that although the CPI in December last year continued to record a new high of 7% year-on-year, the seasonally adjusted monthly increase was only 0.5%. The declines in October and November are evidence that price gains have begun to slow, although a return to normal price levels is still some way off.
In a prepared statement, Biden said: “Today’s report shows that headline inflation fell markedly last month, with both gasoline and food prices falling, suggesting that we are making progress in slowing the pace of price increases. Nonetheless, , we still have a lot of work to do, prices are still too high and household budgets are still tight.”
Biden’s remarks highlighted evidence that many economists believe that rising inflation appears to have peaked, with the U.S. Labor Department reporting that the December CPI surged 7% from a year earlier, the largest increase since June 1982. The increase was 0.5%, which was not only lower than the 0.9% increase in October, but also lower than the 0.8% increase in November.
While this downward trend doesn’t mean prices are falling, it does highlight a moderation in price growth that might be the start of a pullback in inflation towards the Fed’s 2% target.
However, when prices are rising, salaries have not followed suit, which means that many American people are more and more difficult to pay for daily necessities compared with last year, and the runaway inflation will also make voters dissatisfied and feel that their purchasing power is gradually declining.
U.S. real average hourly earnings, which include consumer prices, rose 0.1% in December from November but fell 2.4% from a year earlier, according to Wednesday’s report.
Most economists, including Fed Chairman Jerome Powell, said the coronavirus pandemic has led to high inflation and global supply chains have failed to keep up with strong demand for goods from consumers and businesses.
The pandemic has shut down factories, disrupted shipping routes and hampered companies hiring more workers to speed up production, and the resulting inflation problem might weaken Democrats in the crucial 2022 midterm elections as voters see the The government’s poor performance in handling economic issues.