Inflation held steady in August, extending a stretch of high year-over-year price increases that have soured Americans on the economy heading into November’s midterm elections.
The Labor Department’s consumer price index rose at a 3.4 percent annual pace for the year ending in August, the same as in July, as energy prices rose and rent increases continued to slow.
Drivers were paying an average of $4.28 per gallon for gas on Thursday, according to AAA. That’s down nearly 30 cents from this year’s peak, but still more than a dollar higher than Americans were paying a year ago, before the United States and Israel attacked Iran in late February, disrupting the global oil market.
Increases in home prices, which account for a big chunk of measured inflation, have been slow recently, somewhat offsetting the energy price increases. The growth in housing costs is expected to “continue to slow for another year or so,” analysts at investment bank UBS said in a research report this month.
Ahead of Friday’s report, analysts were predicting a better-than-even chance that the Federal Reserve would hike interest rates to combat inflation.
“As the conflict with Iran drags on longer than many expected, inflation pressures are becoming increasingly entrenched, leaving investors in search of a catalyst strong enough to change the inflation narrative,” Jeffrey Roach, chief economist for LPL Financial, said in an emailed note Thursday. “At this rate, a hike in rates next week appears likely.”
Inflation has now run persistently above the Federal Reserve’s 2 percent annual target for more than five years, complicating the political message for Republicans heading into the Nov. 3 midterms. Americans voted Donald Trump into office last year in part because he promised to fix an inflation-battered U.S. economy. But his war with Iran — and its effect on gas and groceries prices — has caused that support to erode.
A Washington Post-Ipsos poll this summer found that 18 percent of Republicans — nearly one-fifth — are feeling worse off financially since Trump started his second term. That’s compared with just 4 percent who said the same in September 2018, at the same point in Trump’s first term.
“The economy is solid, but inflation sucks,” Sen. John Kennedy (R-Louisiana) told NBC’s “Meet the Press” on Sunday. “People, when they lie down and sleep at night, moms and dads … they’re worried about the cost of living.”
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