The consumer price index, a broad measure of everyday goods and services related to the cost of living, soared 9.1% from a year ago, above the 8.8% Dow Jones estimate. That marked the fastest pace for inflation going back to November 1981. The figures released by the Labor Department showed that the so-called core inflation which excludes volatile items such as food and energy also rose strongly across the year by 5.9%. Core inflation peaked at 6.5% in March and has been nudging down since.
After the CPI report was published, U.S. president Joe Biden’s administration moved quickly to address the subject. The White House claimed that the data is already out of date and the CPI report does not reflect “the full impact of nearly 30 days of decreases in gas prices.” In fact, the White House says that “core inflation” has dropped for the third month in a row.
Persistent price gains highlight trouble for President Biden, whose approval ratings have taken a hit amid climbing costs, and could require continued forceful action from the Fed. The central bank is raising rates to slow the economy and to try to restrain inflation, and it is likely to continue adjusting policy quickly — even if doing so risks tipping the economy into a recession — as inflation looks increasingly out of control.
Why it matters
Perhaps one of the best ways to frame the discussion around the CPI inflation figures comes from Washington Times columnist Tim Young, who wrote on Twitter “Anyone saying ‘If you remove food and fuel from the CPI, inflation really isn’t that bad,’ try to live without food and gas for a month and let me know how that goes.” It really shines a light on the situation that the Biden administration and the Fed are trying to tackle. People are going to want to see action, especially as a separate release highlighted how real wages have fallen further.
