White House warns CPI inflation number will be elevated
White House officials are preparing the country for a hot inflation rate ahead of the release of Wednesday's Consumer Price Index, but they insist that some key inflation components — including gas prices — are coming down.
Driving the news: Independent economists estimate that annual headline inflation will increase to 8.8% for June — up from 8.6% in May — when the Bureau of Labor Statistics releases its CPI report on Wednesday at 8:30 a.m. ET.
- While Biden officials were careful not to predict that June’s CPI print would be the high-water mark for inflation, they noted that average gas prices have been declining since mid-June.
- "Energy prices have fallen significantly from the prices included in the June CPI report," Brian Deese, the director of the National Economic Council, and Cecilia Rouse, the chair of the Council of Economic Advisers, wrote in a memo for public release.
- "The June CPI data will largely not reflect the substantial declines in gas prices we’ve seen since the middle of June."
Flashback: In January, when December's CPI reading came in at 7%, Biden claimed that the monthly increase was slowing.
- "Today’s report — which shows a meaningful reduction in headline inflation over last month, with gas prices and food prices falling — demonstrates that we are making progress in slowing the rate of price increases," he said.
- Then Russia invaded Ukraine, sending energy and food prices higher.
Why it matters: The White House wants to put the coming numbers into context and attempt to minimize their potential political impact.
- Republicans — as well as Democratic economists — have blamed Biden's spending and regulatory polices for driving prices higher.
- Biden officials reject any argument that last year's $1.9 trillion COVID-19 relief bill overheated the economy and contributed to inflation.
- They point to higher prices across the globe, which they say are driven by the war in Ukraine and supply chain disruptions caused by the pandemic.
- "Inflation remains elevated throughout the world, with inflation at 7.7% in Canada, 8.6% in the Euro zone, and 9.1% in the United Kingdom," Deese and Rouse write in the memo.
Between the lines: Gas prices for Americans have recently declined.
- "Retail gas prices per gallon peaked at $5.02 on June 13 and averaged $4.92 across the month," Deese and Rouse write. "Gas prices are now down to around $4.68."
The big picture: Higher prices have contributed to the erosion of President Biden’s support and represent a major challenge for Democrats ahead of the midterm elections..
- Biden and his top economic officials spent most of 2021 arguing the inflation would be temporary.
- In May, Biden declared that taming inflation was his "top priority."
Go deeper: In response to higher oil prices, the administration has participated in the coordinated global release of strategic petroleum reserves.
- Biden has hammered the oil and gas industry and warned them not to gouge consumer, and also called on Congress to suspend the 18 cents-per-gallon federal gasoline tax.
What we're watching: Biden leaves for the Middle East Tuesday night for a trip that will include a summit in Saudi Arabia, where increasing the global supply of oil will be atop the agenda.