The Bureau of Labor Statistics released its Consumer Price Index report for June 2024 last week, showing a 3% year-over-year inflation rate, beating economists’ expectations. Core CPI, which excludes food and energy costs, rose 0.1% month-over-month, bringing the annual rate to 3.3%. Left-leaning economic experts in the mainstream media are now calling for the Federal Reserve to cut interest rates at its next meeting in September. However, a rate cut is not justified at this point.
First, the Federal Reserve is supposed to stay out of politics and have only the nation’s best interests in mind. Cutting interest rates just before the November election would make it look like the Fed and its Chairman Jerome Powell are trying to tip their fingers in favor of Joe Biden. Cutting interest rates would cause inflation, but in the short term it would boost stock prices and allow Biden to claim he has defeated inflation. The inflationary impact of the September rate cut would not be visible to economists, and would not be felt by the American people, until after the November election.
The last thing the Fed wants is to cut rates in September and then be forced to raise them again in early 2025.
Second, a 3% annual inflation rate is still 50% higher than the Fed’s 2% inflation target.
Third, people will say that inflation is going down, but inflation continues to rise, just not as steeply as before. Saying that inflation is going down is like someone who gained 10 pounds one month and 5 pounds the next claiming they’ve lost weight; no, they’re just gaining weight more slowly.
What is hurting the American working class is persistently high inflation.
According to the Bureau of Labor Statistics investigationFor American workers earning less than $40,000 a year, the largest household expenses are housing, transportation, and food, which account for about 65% of household expenditures (33.8%, 16.4%, and 12.4%, respectively). For American workers earning less than $40,000 a year, housing, transportation, and food account for about 70% of household expenditures (37.8%, 18.1%, and 13.8%, respectively).
Add to that the costs of medical expenses, home and auto insurance, and it’s amazing how much money any American has left to save or invest at the end of the month.
And it is precisely these categories that have seen the most increases during Biden’s term in office.
Home prices are soaring: In August 2023, the median home price in the U.S. was $435,450, up from a median of $260,345 at the end of 2019. Rocket Homes.
To buy an average priced home, American To buy a home, you need an annual income of at least $110,000, up 46% since 2020. That means only 18% of individuals, or 34% of households, can currently afford a mortgage, let alone save for a down payment.
food cost Food prices have risen 30% since Joe Biden entered the White House, with staples rising even more: eggs, flour, sugar, and butter are up 40.9%, 33.8%, 30.7%, and 35.9%, respectively.
The price is gas That number has more than doubled under President Biden.
The producer price index, a gauge of future inflation, rose 0.2% in June. Ocean Shipping Fee Exports from China to California have increased fivefold over the past year, helping to explain the rise in PPI.
The Federal Reserve has begun to slow the rate at which inflation is rising. Now is not the time to celebrate prematurely, but to stay the course. Cutting interest rates would be politically and inflationary at a time when working class Americans are still suffering from inflation and the country feels like it is in recession.
The last thing the Fed wants is to cut rates in September and then be forced to raise them again in early 2025.
The question remains: Will Jerome Powell provide leadership or political maneuvering?
