Inflation has slowed, but the economy remains a big problem
Last month, just as the presidential election was heating up, inflation hit a three-year low.
But the high cost of housing and other necessities will put the economy at the center of both major campaigns, as last week’s first debate between Kamala Harris and Donald Trump showed.
The consumer price index, which measures inflation, rose 2.5% last year, the smallest increase since February 2021. according to The Bureau of Labor Statistics released the latest data Wednesday. The main driver of this growth was housing, which rose 0.5% in August. Prices for air tickets, car insurance, education and clothing also increased during the month. But the salary is also Rose It increased 0.4% in August and was up 3.8% last year, with the average workweek increasing by 0.1 hours – good news for workers struggling to keep up with the cost of living.
Voters continue to say the economy is key in deciding who should be president, 81%and four out of ten said the economy and inflation were the most important issues guiding the decision.
Former President and Republican candidate Trump earlier in last week’s debate in Philadelphia blamed the Biden administration for high prices, falsely claiming that the post-pandemic inflation wave was the worst ever.
“We have a terrible economy because of inflation, which is literally called a nation-destroyer, it’s tearing the country apart,” Trump said. “We have inflation that few people have ever seen. It’s probably the worst in the history of our country.” once. explain.
The worst inflation rate in U.S. history was actually in 1980, when it was 14%. The current inflation wave is the highest since then, peaking at 9.1% in June 2022.
Democratic nominee and Vice President Harris responded to questions about the economy on Tuesday by proposing tax cuts to lower housing costs.
“For too many people, housing costs are too high. We know young families need support to raise their children, and I intend to provide these families with a $6,000 tax break, the largest child tax credit we have given in a long time. Free so that these young families can afford to house cribs, buy car seats, buy clothes for their children,” she said.
Harris also introduced a proposal to reduce taxes by $50,000 for small start-up businesses.
Taylor St. Germain, an economist at ITR Economics, a nonpartisan economic research and consulting firm based in New Hampshire, said the latest data showing that inflation has slowed is enough to indicate that it is time for the Fed to Interest rates are starting to be cut.
“It’s encouraging to see inflation slowing and slowing to such low levels,” St. Germain said. “However, of course, it’s still high, and one of the reasons it’s still high is that housing costs drive a large portion of inflation, and rents are also rising, especially when we look at the latest Consumer Price Index report. .
The Federal Reserve began raising interest rates in March 2022 to curb inflation and has raised interest rates 11 times. The last increase was in July last year.
Economists are closely watching whether the Federal Reserve will cut interest rates at its meeting this week, which is expected to have an impact on the housing market and other costs.
Kitty Richards, senior strategy adviser at the Groundwork Collaborative, a progressive think tank based in Washington, D.C., said the Fed’s decision is driving up housing costs.
“The housing problem is fundamentally a supply problem. The Fed’s actions have made the supply problem worse by effectively locking down the housing market and making it more expensive to buy, build or rehabilitate housing,” she said . “Housing is a huge part of people’s economic experience, and housing is really important to people when they want to move and look around but can’t. They can’t even afford a house that’s the same price as the house they live in, Because interest rates are too high.
