Inflation hit a three-year low last month, just before the presidential election.
But the high cost of housing and other imperative goods will ensure that the economy remains at the center of both major election campaigns, as was seen this week in the first debate between Kamala Harris and Donald Trump.
The consumer price index, a measure of inflation, rose 2.5% last year, the smallest boost since February 2021. accordingly the latest data from the Bureau of Labor Statistics released on Wednesday. The main driver of this boost was housing costs, which rose 0.5% in August. Airfares, auto insurance, education and clothing also rose this month. But wages also rose by 0.4 percent in August and by 3.8 percent over the past year, and the average working week has increased by 0.1 hours – welcome news for workers trying to cover the cost of living.
Voters continue to say the economy is key in deciding who should be president. 81%And four out of ten say that the economy and inflation are the most critical factors influencing this decision.
Trump, the former president and Republican candidate, blamed the Biden administration for high prices at the start of Tuesday’s debate in Philadelphia, falsely claiming that the post-pandemic wave of inflation was the worst ever.
“We’ve had a terrible economy because inflation, which is really known to be country-destroying, tearing countries apart. We have inflation like very few people have ever seen before, probably the worst in the history of our country,” Trump said. said.
In fact, the highest inflation rate in U.S. history was in 1980, when it was 14%. The current wave—the highest inflation boost since then—peaked at 9.1% in June 2022.
Democratic candidate and Vice President Harris responded to questions about the economic situation on Tuesday by touting proposals for tax cuts to combat housing costs.
“Housing costs are far too high for far too many people. We know that young families need support to raise their children, and I intend to give those families a $6,000 tax credit. That’s the largest child tax credit we’ve given in a long time, so that those young families can afford a crib, a car seat and clothes for their children,” she said.
Harris also proposed a $50,000 tax deduction for diminutive startup companies.
Taylor St. Germain, an economist at ITR Economics, a nonpartisan economic research and consulting firm based in New Hampshire, said the latest data show that inflation is easing sufficiently to suggest it is time for the Federal Reserve to start cutting interest rates.
“It’s encouraging to see inflation starting to ease and come down to these much lower levels,” St. Germain said. “However, it’s still high, of course, and one of the reasons for that is that housing costs are driving a significant portion of that inflation, with rents also rising, particularly when we look at this recent CPI report.”
To reduce inflation, the Fed began raising interest rates in March 2022. It raised rates eleven times and made its last rate hike in July last year.
Economists are closely watching whether the Fed cuts interest rates at its meeting next week, as this is expected to have an impact on the housing market and other costs.
Kitty Richards, acting executive director of the Groundwork Collaborative, a progressive think tank based in Washington DC, said the Fed’s decisions would contribute to housing costs.
“The housing problem is fundamentally a supply problem. And the Fed’s actions are actually making that supply problem worse by blocking the housing market and making housing more expensive to buy, build or rehab,” she said. “Housing is such a big part of people’s economic experience and it’s really important to people when they want to move and look around but can’t. They can’t even afford to buy a home that’s the same price as the home they live in because interest rates are so high.”
