U.S. inflation was unexpectedly high last month, the news sent Wall Street to its worst day in more than two years.
The Labor Department said prices rose 8.3 percent in the 12 months through August, faster than the 8.1 percent economists had expected.
This was down from 8.5 percent in July, due to lower petrol prices.
But the costs of food, housing and medical care continued to rise, frustrating investors.
The Dow Jones Industrial Average fell nearly 4%, the S&P 500 fell 4.3%, and the Nasdaq sank more than 5%.
This is the fastest day of decline since June 2020.
For U.S. President Joe Biden, whose approval rating fell below 40 percent earlier this year amid fears for his life, the report was also a troubling sign ahead of national elections in November. They will determine whether Mr. Biden’s Democrats maintain their tenuous control of Congress.
Pollster Chris Jackson said that while Mr. Biden’s ratings have rebounded slightly in recent weeks as gasoline prices have fallen, the issue remains “a huge problem.”
He added that it would be unprecedented for a president with an approval rating like Mr. Biden’s to win his party seats in the midterms.
“Americans have been telling us for months that this is their number one concern and, rightly or wrongly, they blame whoever runs the country for it,” said Mr. Jackson, a senior vice president at the Ipsos polling firm.
Inflation in the US reached 9.1 percent in June, the fastest increase since the early 1980s. It fell to 8.5 percent in July, as petrol prices fell, easing again last month.
In a statement on Tuesday, Mr. Biden focused on the improvement, saying: “Overall, prices across our country have been essentially flat over the past two months: that’s welcome news for American families, with more There is work to be done.”
Speaking to reporters on his way to Delaware later in the day, the Democratic president said he was not concerned about the latest inflation report.
Earlier, Mr. Biden hosted a White House event to celebrate one month after the passage of the Inflationary Reduction Act, a spending bill that a nonpartisan congressional scorekeeper found would raise consumer prices. But there will be no meaningful impact.
Money worries are at the forefront of many consumers’ minds.
Kenny Schorne recently took a break from his master’s degree program in communications, worried about being able to afford it as other expenses mount. The 23-year-old, who supports himself in construction and photography jobs, lives with his family in New Jersey to try to keep costs down.
“Inflation makes it hard for me to see a livable future,” he said. “It really gets to me because I don’t know what the answer is.”
In the 12 months to August, the price of groceries rose 13.5 percent in the U.S., while housing costs rose 6.2 percent and medical care rose 5.6 percent.
Energy costs — one of the biggest drivers of inflation — are also much higher than a year ago, despite falling sharply in the past two months, falling more than 10 percent from July to August, the Labor Department said. The Labor Department said.
The overall consumer price index, which tracks goods and services across the economy, rose 0.1 percent from July to August, as a drop in gasoline prices was offset by gains in other areas.
Some breathing room?
While economists remain concerned as energy prices continue to rise, annual numbers generally matter most in shaping people’s perceptions, said Betsey, a professor of economics and public policy at the University of Michigan. said Stevenson, who served in the White House under the former prime minister. President Barack Obama.
“It’s really good news that gas prices are coming down. It gives people a little more room in their budget, a little more breathing room and I think it makes people feel a little better. It happens,” he said.
But he added: “I don’t think it speaks of being out of the woods”. It expects inflation to remain above the US central bank’s 2% inflation target until the end of next year.
Like central banks in other countries, including Britain, policymakers at the Federal Reserve have been raising interest rates since March to combat the problem.
By making borrowing more expensive, hikes are intended to reduce demand from households and businesses, helping to reduce inflationary pressures.
The Fed is widely expected to announce another big hike this month, a move analysts said was confirmed by the latest report. But large rate hikes also raise the risk of a recession as the economy slows.
“Investors should brace themselves for higher-than-expected rates ahead of today’s release,” said Ronald Temple, managing director, co-head of multi-asset and head of US equities at Lizard Asset Management.
“Despite the fastest tightening of monetary policy in decades, the Fed still has an overburdened burden.”
