Biden Says 7.1% Inflation in November Proves His Policies Are Working
President Joe Biden says that U.S. inflation rates are falling and that prices would return to normal at the end of next year.
Inflation has been skyrocketing since mid-2021, which experts attribute to trillions of dollars in government stimulus spending, a supply chain crisis, and an imbalance in demand caused by COVID-19 lockdowns, Moscow’s invasion of Ukraine, and higher energy prices.
U.S. consumer prices rose less than expected in November, for the second time in a row, with the smallest annual increase in inflation in nearly a year, according to the U.S. Bureau of Labor Statistic’s Consumer Price Index (CPI) on Dec. 13.
The latest news on inflation “provides some reason for optimism for the holiday season and, I would argue, for the year ahead,” said Biden from the White House on Dec. 13.
“In a world where inflation is rising in double digits in many major economies around the world, inflation is coming down in America.”
While Still High, Inflation Declined in November
Consumer prices rose 7.1 percent in November from the same month last year, for the lowest rate of growth since December 2021, a decline from the 7.7 percent increase in October.
The drop in inflation appears to have encouraged the Federal Reserve to start reducing the size of its interest rate hikes.
November’s CPI data reflected a decline in gas, health care, and used vehicle prices, but food and rent prices went up.
The energy index declined 1.6 percent in November from the same month a year ago, owing to a 2 percent drop in American gas prices, which were a key factor in lowering inflation that month.
Used vehicle prices, which were a major contributor to inflation in 2021, dropped by 2.9 percent last month from October and were down 3.3 percent from a year ago.
Core consumer prices, which exclude food and energy, climbed by 6 percent compared to last November.
Biden touted the positive news on gas prices, but said that he wanted to get overall price increases under control without hurting economic growth, while maintaining a strong labor market.
He did note a slowdown in the increase of the price of food in November, which rose by 0.5 percent, up 10.6 percent from a year ago, while the cost for many items like new cars and appliances continued to rise.
“What is clear is that my economic plan is working, and we are just getting started. My goal is simple: Get prices increases under control without choking off economic growth,” said the president.
Biden Says High Inflation Is at an End
The president said that he believes the CPI numbers are evidence that inflation was nearing its peak, but that more work needs to be done to bring prices down.
“I want to be clear, it’s going to take time to get inflation back to normal levels. As we make the transition to a more stable growth, we could see setbacks along the way as well. We shouldn’t take anything for granted,” he added.
Biden stated that he expects inflation to return to pre-pandemic levels by the end of 2023.
“I am just convinced they are not going to go up,” said Biden, when asked by a reporter if he thought there would be another jump in inflation in the near future.
However, Republicans responded to the president’s remarks, noting that domestic prices still remain significantly higher than they were last year.
“As a result of Democrats’ reckless spending, Americans will pay more this year to put gifts under the tree, heat their homes, and feed their families. Democrats don’t care about the burden their agenda has placed on families,” said Republican National Committee Chairwoman Ronna McDaniel.
Fed to Reduce Rate of Interest Rate Hikes
Meanwhile, inflation is still well above the Fed’s target of 2 percent, a level at which it could finally claim that prices are under control.
At the last Fed meeting of the year, central bank officials are due to discuss the next steps to reduce inflation, before they release their latest policy rate decision on Dec. 14.
Economists and investors expect the Fed to raise interest rates by 50 basis points, after four monthly consecutive increases of 75 basis points.
Wall Street stocks rose in expectation that the Fed will ease its hawkish rate policy owing to lower inflation numbers, with the Dow Jones Industrial Average up 103 points at closing on Dec. 13.
“The market obviously believes that there’s going to be a pivot or a pause, that’s what we saw today,” Steve Grasso, CEO of Grasso Global, told CNBC.
“If [Fed Chair Jerome] Powell puts a wet blanket on that, the market’s going to sell off.”
The next central bank meeting will be held between Jan. 31 to Feb. 1, 2023.
Reuters contributed to this report.
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Bryan S. Jung is a native and resident of New York City with a background in politics and the legal industry. He graduated from Binghamton University.
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