Biden Team Points At The Fed As Inflation News Worsens
The White House’s argument that policy makers are effectively handling the cost-of-living surge was dramatically punctured Friday.
(Bloomberg) -- The White House’s argument that policy makers are effectively handling the cost-of-living surge was dramatically punctured Friday morning, as inflation unexpectedly hit a fresh 40-year high and consumer sentiment tumbled to a record low.
“Today’s report underscores why I have made fighting inflation my top economic priority,” President Joe Biden said in a statement Friday. “While it is good to see critical ‘core’ inflation moderating, it is not coming down as sharply and as quickly as we must see.”
The president said the US needed to “do more - and quickly - to get prices down,” and called on Congress to pass legislation that would reduce the cost of energy, prescription drugs, and shipping. Biden visited a port facility in Los Angeles Friday to push that message.
His stark tone reflects broad concern among the American electorate about the state of the economy, despite strong employment figures. The University of Michigan’s consumer sentiment index hit the lowest in records dating back to 1980, data showed Friday. That followed a government report showing consumer prices leaped 8.6% in the year to May, the most in 40 years. Investors reacted by dumping stocks, with the S&P 500 down almost 3% midday.
While the White House stopped labeling inflation as “transitory” months ago, the data show that the price surge has yet to peak -- raising the risk of a recession. It’s disastrous news for Democrats facing the loss of control of Congress in November elections.
The administration has turned to emphasizing the Federal Reserve’s role in attempting to bring prices under control, with Biden meeting with Chair Jerome Powell at the White House last month. That narrative resumed on Friday.
“What the numbers today underscore is what the president has been saying and what we are focused on -- which is fighting inflation has got to be our top economic priority,” Brian Deese, the director of the National Economic Council, said on Friday on Bloomberg TV. “The Fed has the tools that it needs, and we are giving them the space that it needs to operate.”
One administration official conceded Friday’s inflation numbers were bad. Privately, inflation has been coloring the decision-making of the Biden team for weeks, said one person familiar with the internal deliberations.
Cecilia Rouse, chairwoman of the Council of Economic Advisers, said in an interview with Bloomberg Television that the administration expected “elevated” inflation numbers. Rouse said Biden was giving the Federal Reserve “the space to do what they need to do.”
“Part of the market’s reaction is expecting the Fed to take that seriously, which will generate some cooling,” Rouse said.
Aides have been loath to make decisions on agenda items like forgiving student loan debt, or lifting Trump-era tariffs on China -- either for fear it will add to the accelerating inflation, or hand Republicans another taking point about Biden’s handling of the economy, said a person familiar with the discussions.
In poll after poll, voters have called inflation and the economy the most pressing issues facing the country. In a recent Wall Street Journal-NORC poll, 83% of those surveyed called the economy poor or not-so-good, with 35% saying they weren’t satisfied with their own financial situations.
The University of Michigan’s preliminary index for June slid to 50.2, below all the forecasts in Bloomberg’s survey, thanks to fears of inflation. Voters tend to hold the party in power responsible for any weaknesses in the economy.
The administration is searching for any and all new ideas to try to bring down prices, especially for energy. Treasury Secretary Janet Yellen cautioned on Thursday that gasoline prices could rise further.
“When it comes to energy prices, we know what is driving this,” Deese said on Bloomberg TV. “We are dealing with a vicious war in Europe, that has driven up the price of oil and driven up the price of gas at the pump. The president is using every executive authority that he has right now -- and we need everybody to step up.”
The consumer price index increased 1% in May from a month before, according to Labor Department data on Friday. Grocery prices rose 11.9% annually, the most since 1979, while electricity increased 12%, the most since August 2006. Rent of primary of residence climbed 5.2% from a year earlier, the most since 1987.
(Updates with Biden comments from second paragraph)
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