The White House received the latest in a string of high inflation reports Friday, more than six months after the Trump administration started a conflict with Iran with no end in sight that has cemented a political quagmire: higher gas prices heading in — and out — of November’s midterm elections.
Since the first heightened inflationary report came out this spring, the administration has insisted the economic disruption would be short-lived. But with each passing month, reality has proven otherwise, despite the White House’s efforts to cool some areas of inflation.
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, with energy prices making up a big chunk of all increases.
Drivers were paying an average of $4.30 per gallon for gas on Friday, according to AAA. That’s down about 25 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. And the price for diesel fuel surpassed $6 on Friday for the first time ever, AAA said.
Faced with the stubbornly high gas prices, President Donald Trump this week took a different tack, acknowledging prices will remain high through the midterms but “will be plummeting” right afterward.
“The war will be over very shortly after the election,” Trump said Wednesday at the GOP’s midterm convention in Dallas.
The White House points to certain sectors that have fallen this year including prescription drugs, which the administration attributes to Trump policies.
“Putting an end to Joe Biden’s inflation crisis has been a Day One priority for President Trump, and the August CPI report reinforces how the Trump administration’s targeted policy interventions are delivering with dramatic month-over-month price reductions for beef, prescription drugs, and car insurance,” White House spokesman Kush Desai said in a statement.
But higher energy prices are trickling out into other sectors, pushing up the cost of transporting Americans’ groceries and other consumer goods.
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.
Overall, prices for August were up 0.4 percent over July, with gasoline prices making up more than a third of the increase. But the annual inflation rate held steady, the report said.
Core prices, which exclude volatile food and energy, rose 0.3 percent in August from July, exceeding analysts’ expectations of a 0.2 percent increase. Core inflation is closely watched by the Federal Reserve, which must decide whether to raise interest rates at its meeting next week.
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 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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