US inflation falls to 2.4% less than a month before Election Day

U.S. consumer prices rose 2.4% in the United States in September from a year earlier, down from 2.5% in August, according to the Bureau of Labor Statistics. This represents the lowest annual rise since February 2021, when prices began to climb, reaching their highest levels in four decades, This is the last report on the consumer price index (CPI) to be published before the presidential elections on November 5. Over the past few years, the rise in fuel and food prices, and those of other products, has eroded the popularity of President Joe Biden and his vice president, the Democratic candidate Kamala Harris, giving wings to her Republican rival, Donald Trump. Now that Election Day is approaching, inflation is dropping to levels close to the stability objective of 2%, but voters are still feeling the pain: inflation may have fallen, but prices have not.

Measured from month to month, the figures show a spike in food prices that were largely responsible for the 0.2% rise from August to September of the Consumer Price Index for All Urban Consumers, which was higher than the 0.1% expected by most analysts. The recent rise in crude oil prices also threatens to spill over into the gas pump, which is more visible to the average citizen than any price index.

The price data, together with the strong job creation figures published last week, show that the economy is going through an almost sweet moment, the kind of soft landing that the Federal Reserve has been trying to achieve for more than two years. Fed chair Jerome Powell began the era of rate cuts with an aggressive half-point reduction in September, but he is expected to slow down the pace and that the next cuts will be of a quarter point. This Thursday’s inflation figures confirm this idea, because inflation is not yet completely under control.

Further evidence that the battle is not won is the underlying inflation rate, which excludes food and energy. Core prices rose 0.3% month-to-month and 3.3% from a year earlier, a tenth of a percentage point higher than what the market was expecting, but also a tenth higher than the August figure of 3.2%. A rise in energy prices could complicate the Federal Reserve’s task at any given point.

At the September Fed meeting, in fact, there was a dissenting vote for the first time in many years. Governor Michelle Bowman said in a statement that “although it is important to recognize that there has been meaningful progress on lowering inflation, while core inflation remains around or above 2.5%, I see the risk that the Committee’s larger policy action could be interpreted as a premature declaration of victory on our price stability mandate.”

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