Inflation slowed again in August in the United States, thanks to the fall in gasoline prices, but remains very high due in particular to soaring food prices, a thorn in the side of Joe Biden in two months of midterm elections.
Inflation fell to 8.3% year on year in August from 8.5% in July, according to the Consumer Price Index (CPI) released Tuesday by the Labor Department, which benchmarks and is used in order, in particular, to index pensions.
The slowdown is however less severe than expected by analysts, who saw inflation settle at 8%.
And over one month, prices started to rise again, at +0.1% compared to July, against zero inflation between June and July, and while analysts were expecting a drop, to -0.1%.
Compared to July, gasoline prices fell by 10.6%. Those of food, on the other hand, increased by 0.8% over one month, and even by 11.4% over one year, the largest increase since 1979.
This new slowdown eases a little the pressure for Joe Biden two months before the crucial mid-term elections, and while the Republican opposition regularly accuses him of having, through his policy, largely contributed to this inflationary outbreak.
The US president acknowledged in a statement on Tuesday that “it would take more time and willpower to bring down inflation”. However, he believes that the figures show “progress”.
Inflation in the United States, that is to say the rise in prices measured over twelve months, fell to 8.3% in August against 8.5% in July, but this slowdown is less marked than expected by the experts.
‘Essential’ to reduce inflation
The American president will hold a ceremony at the White House on Tuesday afternoon in honor of his “Inflation Reduction Act”, the plan to fight against climate change, which he succeeded in getting adopted by Congress in August.
The text must fight against climate change and help households cope with inflation in the medium term, with financial incentives intended to move the American economy towards renewable energies, a limitation on the price of certain drugs and the creation a minimum corporate tax rate.
For a year and a half, prices have been soaring, eroding household purchasing power. Inflation had reached its highest level in more than 40 years in June, before slowing down in July.
“Inflation is far too high and it is essential to reduce it”, hammered Sunday on CNN the secretary of the Treasury, Janet Yellen, acknowledging that there is “a risk” of recession, because of the actions carried out by the bank central US government (Fed) to slow the economy and thus contain inflation.
But “we have a solid labor market, and I believe it is possible to maintain it”, and, “in the longer term, we cannot have a solid labor market without inflation under control”, added Joe Biden’s Treasury Secretary.
Soft landing unlikely
The Fed warned that it would continue to raise its key rates sharply. This pushes commercial banks to offer more expensive loans to their individual and business customers, who are less inclined to consume and invest, which should help ease the pressure on prices.
“Time is running out,” warned its president, Jerome Powell, on Thursday.
Another Fed official, Governor Christopher Waller, said on Friday that it “is still too early to say that inflation is slowing in a significant and lasting way.”
The Fed favors another measure of inflation, the PCE index, which also slowed in July (+6.3% year-on-year), and bringing it back to around the 2% considered healthy for the economy “will take some time. time “. But recession fears, which he said have “faded”, along with the strength of the labor market, give the Fed “the flexibility to be aggressive”.
The job market remains very tight with a shortage of workers. However, the unemployment rate rose a little in August, to 3.7%.
It is “unlikely” however, but “not impossible”, that the Fed achieves the “soft landing” it hopes for, i.e. to curb inflation by only slightly increasing unemployment, say economists Laurence Ball of Johns Hopkins University, and Daniel Leigh and Prachi Mishra of the IMF, in a paper published last Wednesday by the Brookings Institution.
According to them, the Fed “will probably have to push unemployment well above its projection of 4.1%”.